nep-pay New Economics Papers
on Payment Systems and Financial Technology
Issue of 2022‒04‒11
thirty-two papers chosen by

  1. Equilibrium in Two-Sided Markets for Payments: Consumer Awareness and the Welfare Cost of the Interchange Fee By Kim Huynh; Gradon Nicholls; Oleksandr Shcherbakov
  2. Digital Payments Taxation Factsheet: Tanzania By Olawole, Ifeoluwa; Lees, Adrienne; Abounabhan, Mary
  3. Stablecoins and Central Bank Digital Currencies: Policy and Regulatory Challenges By Barry Eichengreen; Ganesh Viswanath-Natraj
  4. Digital Payments Taxation Factsheet: Kenya By Olawole, Ifeoluwa; Abounabhan, Mary; Niesten, Hannelore
  5. (R)evolution in Entrepreneurial Finance? The Relationship between Cryptocurrency and Venture Capital Markets By Kirill Shakhnov; Luana Zaccaria
  6. Central bank digital currency with heterogeneous bank deposits By Remo Nyffenegger
  7. Applications of cloud computing in modern marketing By Abid, Hofa
  8. Digital Payments Taxation Factsheet: Uganda By Lees, Adrienne; Villacreces Villaces, Daniela
  9. The era of platforms and the development of data marketplaces in a free competition environment By Da Silva, Filipe; Núñez Reyes, Georgina
  10. Open Banking: Credit Market Competition When Borrowers Own the Data By Zhiguo He; Jing Huang; Jidong Zhou
  11. Failure of Gold, Bitcoin and Ethereum as safe havens during the Ukraine-Russia war By Alhonita YATIE
  12. News or noise: Mobile internet technology and stock market activity By Brown, Nerissa C.; Elliott, W. Brooke; Wermers, Russ; White, Roger M.
  13. Objectives of platform research: A co-citation and systematic literature review analysis By Fabian Schueler; Dimitri Petrik
  14. Foreign Direct Investment, Information Technology and Total Factor Productivity Dynamics in Sub-Saharan Africa By Simplice A. Asongu; Nicholas M. Odhiambo
  15. The Evolution of Blockchain: from Lit to Dark By Agostino Capponi; Ruizhe Jia; Ye Wang
  16. A Short Survey on Business Models of Decentralized Finance (DeFi) Protocols By Teng Andrea Xu; Jiahua Xu
  17. Central Bank Digital Currency in a Developing Economy: A Dynamic Stochastic General Equilibrium Analysis By Rivera Moreno, Pablo Nebbi; Triana Montaño, Karol Lorena
  18. Asia Digital Common Currency as a Global (International) Currency By Wataru Takahashi; Taiji Inui
  19. Strengthened Regulations for Digital Platform Businesses in China: Focusing on the Anti-Monopoly Law (Japanese) By KAWASHIMA Fujio
  20. Crowd-based accountability: examining how social media commentary reconfigures organizational accountability By Karunakaran, Arvind; Orlikowski, Wanda J.; Scott, Susan V.
  21. Information vs Competition : How Platform Design Affects Profits and Surplus By Piolatto, A.; Schuett, Florian
  22. Knowledge and Technology Transfer under Digital Conditions: Transfer Intermediaries in Eastern Germany and the Role of Digital Means, Trust and Face-to-Face Interactions By Noack, Anika
  23. Digital Entrepreneurship Indicator (DEI): An Analysis of the Case of the Greater Paris Metropolitan Area By Dorine CORNET; Jean BONNET; Sébastien BOURDIN
  24. Technological solutions to guaranteed wage payments of construction workers in China By Huang, Kun.; Elder, Sara
  25. Reputation systems and recruitment in online labor markets: insights from an agent-based model By Lukac, Martin; Grow, André
  26. The Evolution of U.S. Retail Concentation By Dominic A. Smith; Sergio Ocampo
  27. Macroeconomic Predictions Using Payments Data and Machine Learning By James Chapman; Ajit Desai
  28. Transformación digital de las mipymes: elementos para el diseño de políticas By Dini, Marco; Gligo, Nicolo; Patiño, Alejandro
  29. Do Startups Benefit from Their Investors’ Reputation? Evidence from a Randomized Field Experiment By Shai Bernstein; Kunal Mehta; Richard R. Townsend; Ting Xu
  30. Crowdwork for young people risks and opportunities By O'Higgins, Niall.; Pinedo Caro, Luis.
  31. Decentralized Decision-Making in Retail Chains: Evidence from Inventory Management By Victor Aguirregabiria; Francis Guiton
  32. Venture capital investments through the lens of network and functional data analysis By Christian Esposito; Marco Gortan; Lorenzo Testa; Francesca Chiaromonte; Giorgio Fagiolo; Andrea Mina; Giulio Rossetti

  1. By: Kim Huynh; Gradon Nicholls; Oleksandr Shcherbakov
    Abstract: The market for payments is an important two-sided one, where consumers benefit from increased merchant acceptance of payment cards and vice versa. The dependence between the decisions that are made on each side of the market results in various network externalities that are often discussed but rarely quantified. We construct and estimate a structural two-stage model of equilibrium in a market for payments in order to quantify the network externalities and identify the main determinants of consumer and merchant decisions. The estimation results suggest significant heterogeneity in consumer adoption costs and benefits. We discuss the critical characteristics that determine which payment instrument is used at the point of sale. Our counterfactual simulation measures the degree of excessive intermediation by credit card providers.
    Keywords: Bank notes; Digital currencies and fintech; Econometric and statistical methods; Financial services
    JEL: C51 D12 E42 L14
    Date: 2022–03
  2. By: Olawole, Ifeoluwa; Lees, Adrienne; Abounabhan, Mary
    Abstract: Digital financial services in Tanzania have increased the efficiency of service delivery and lowered the cost of financial transactions, thereby increasing the financial inclusion of the poor.
    Keywords: Governance,
    Date: 2022
  3. By: Barry Eichengreen; Ganesh Viswanath-Natraj
    Abstract: Stablecoins and central bank digital currencies are on the horizon in Asia, and in some cases have already arrived. This paper provides new analysis and a critique of the use case for both forms of digital currency. It provides time-varying estimates of devaluation risk for the leading stablecoin, Tether, using data from the futures market. It describes the formidable obstacles to widespread use of central bank digital currencies in cross-border transactions, the context in which their utility is arguably greatest. The bottom line is that significant uncertainties continue to dog the region's digital currency initiatives.
    Date: 2022–02
  4. By: Olawole, Ifeoluwa; Abounabhan, Mary; Niesten, Hannelore
    Abstract: Digital financial services are growing in Kenya and play an important role in supporting the financial inclusion of the poor.
    Keywords: Governance,
    Date: 2022
  5. By: Kirill Shakhnov (University of Surrey); Luana Zaccaria (EIEF)
    Abstract: We propose a model of entrepreneurial finance where start-ups raise capital via Initial Coin Offering (ICO) or traditional funding methods such as Venture Capital (VC). While token sales allow startups to leverage network effects, VC's value-adding services enhance product quality. We show that, even when projects have large potential network effects, ICOs may not be optimal if entrepreneurial ability is low. Moreover, despite the potential complementarity between network effects and value-adding services, entrepreneurs combine VC and ICO funding only in highly efficient VC markets and for projects with high network effects. Using data on funding rounds of blockchain startups, we empirically validate the main results of the model.
    Date: 2022
  6. By: Remo Nyffenegger
    Abstract: This paper analyses the effects of an introduction of a retail central bank digital currency (CBDC) on bank intermediation in a general equilibrium model with heterogeneous bank deposits and an imperfectly competitive loan market. I find that the impacts of a CBDC strongly differ depending on whether it is used as a medium of exchange or as a saving vehicle. A calibration of the model to the US economy from 1987-2006 shows that if a CBDC is only used as a medium of exchange, a 10% increase in the fraction of people who hold central bank money as a medium of exchange decreases bank lending only by 0.2%. The effect is four times stronger if CBDC is only used as a saving vehicle.
    Keywords: Central bank digital currency, bank lending, new monetarism, overlapping generations
    JEL: E42 E50 E58
    Date: 2022–03
  7. By: Abid, Hofa (Bt research scoiety)
    Abstract: Many cloud-based marketing programs, ranging from CRM systems to marketing automation solutions, are already widely used. These services let marketers monitor campaigns and activities across mobile, social, and Web platforms, as well as customer interactions. As Internet usage has spread across devices, there are more ways to engage potential consumers in this modern era - but it is also more challenging to attract their attention. Customers desire stuff that is unique, organic, engaging, and personalized. Marketers may employ cloud technology to generate new data-driven strategies and more tailored and targeted marketing. These tools will very definitely be combined with one of the digital marketing components listed below.
    Date: 2020–08–11
  8. By: Lees, Adrienne; Villacreces Villaces, Daniela
    Abstract: Digital financial services are growing in Uganda and play an important role in supporting the financial inclusion of the poor.
    Keywords: Governance,
    Date: 2022
  9. By: Da Silva, Filipe; Núñez Reyes, Georgina
    Abstract: The data economy has presented challenges that go far beyond the scope of traditional regulatory frameworks and competition policies. The role of data, digitalization and the dynamic those factors have imposed on the economy have created significant challenges that the regulatory authorities must confront. At the heart of the debate is the impact of digitally-enabled business models and the digital platforms themselves. In this context, many enterprises, particularly small ones, are facing unfair competition from digitally native companies. The digitalization of the economy, the digitally-enabled business model and the intensive use of data are generating opportunities for enterprises and governments. The creation of data marketplaces and the elimination of barriers to the free flow of data have the potential to improve innovation and productivity in the economy. From a fiscal perspective, understanding the role of data and pricing them are therefore essential to closing gaps and levelling the playing field. Moreover, it is primarily start-ups and disruptor companies that benefit from the pricing of databases.The data economy has presented challenges that go far beyond the scope of traditional regulatory frameworks and competition policies. The role of data, digitalization and the dynamic those factors have imposed on the economy have created significant challenges that the regulatory authorities must confront. At the heart of the debate is the impact of digitally-enabled business models and the digital platforms themselves. In this context, many enterprises, particularly small ones, are facing unfair competition from digitally native companies. The digitalization of the economy, the digitally-enabled business model and the intensive use of data are generating opportunities for enterprises and governments. The creation of data marketplaces and the elimination of barriers to the free flow of data have the potential to improve innovation and productivity in the economy. From a fiscal perspective, understanding the role of data and pricing them are therefore essential to closing gaps and levelling the playing field. Moreover, it is primarily start-ups and disruptor companies that benefit from the pricing of databases.
    Date: 2022–03–04
  10. By: Zhiguo He (University of Chicago, Booth School of Business); Jing Huang (University of Chicago, Booth School of Business); Jidong Zhou (Cowles Foundation, Yale University)
    Abstract: Open banking facilitates data sharing consented to by customers who generate the data, with the regulatory goal of promoting competition between traditional banks and challenger fintech entrants. We study lending market competition when sharing banks’ customer transaction data enables better borrower screening. Open banking can make the entire financial industry better off yet leave all borrowers worse off, even if borrowers have the control of whether to share their banking data. We highlight the importance of the equilibrium credit quality inference from borrowers’ endogenous sign-up decisions. We also study extensions with fintech affinities and data sharing on borrower preferences.
    Keywords: Open banking, Data sharing, Banking competition, Digital economy, Winner's curse, Privacy
    JEL: G21 L13 L52 O33 O36
  11. By: Alhonita YATIE
    Abstract: This paper studies the impact of fear, uncertainty and market volatility caused by the Ukraine-Russia war on crypto-assets returns (Bitcoin and Ethereum) and Gold returns. We use the searches on Wikipedia trends as proxies of uncertainty and fear and two volatility indices: S&P500 VIX and the Russian VIX (RVIX). The results show that Bitcoin, Ethereum and Gold failed as safe havens during this war.
    Keywords: War, Russia, Ukraine, crypto-assets, Gold, Safe haven
    JEL: H56 G32 G12 G15
    Date: 2022
  12. By: Brown, Nerissa C.; Elliott, W. Brooke; Wermers, Russ; White, Roger M.
    Abstract: Mobile internet devices reduce trading frictions and information search costs for investors, but also introduce attention-competing activities,such as social networking. We use exogenous nationwide and city-level outages of the Blackberry Internet Service (BIS) to investigate the effect of mobile internet technology on investors'information-gathering vs. attention-diverting activities. We find that trading volume and trading frequency surge by about 5% on days when mobile internet systems go dark, consistent with a greater role for devices (when not dark) in diverting the limited attention of investors away from information-gathering and trading - even when they are used by presumably more sophisticated investors.
    Keywords: mobile technology,investor activity,stock market liquidity,limited attention,distraction
    JEL: D83 G12 G14 L86
    Date: 2021
  13. By: Fabian Schueler; Dimitri Petrik
    Abstract: Business economics research on digital platforms often overlooks existing knowledge from other fields of research leading to conceptual ambiguity and inconsistent findings. To reduce these restrictions and foster the utilization of the extensive body of literature, we apply a mixed methods design to summarize the key findings of scientific platform research. Our bibliometric analysis identifies 14 platform-related research fields. Conducting a systematic qualitative content analysis, we identify three primary research objectives related to platform ecosystems: (1) general literature defining and unifying research on platforms; (2) exploitation of platform and ecosystem strategies; (3) improvement of platforms and ecosystems. Finally, we discuss the identified insights from a business economics perspective and present promising future research directions that could enhance business economics and management research on digital platforms and platform ecosystems.
    Date: 2022–02
  14. By: Simplice A. Asongu (Yaounde, Cameroon); Nicholas M. Odhiambo (Pretoria, South Africa)
    Abstract: Compared to other regions of the world, the potential for information technology penetration in sub-Saharan Africa (SSA) is very high. Unfortunately, productivity levels in the region are also very low. This study investigates the importance of information technology in influencing the effect of foreign direct investment (FDI) on total factor productivity (TFP) dynamics. The focus is on 25 countries in SSA. Information technology is measured with mobile phone penetration and internet penetration, while the engaged TFP productivity dynamics are TFP, real TFP, welfare TFP, and real welfare TFP. The empirical evidence is based on the Generalised Method of Moments. The findings show that, with the exception of regressions pertaining to real TFP growth for which the estimations do not pass post-estimation diagnostic tests, it is apparent that information technology (i.e. mobile phone penetration and internet penetration) modulate FDI to positively influence TFP dynamics (i.e. TFP, welfare TFP, and welfare real TFP). Policy and theoretical implications are discussed.
    Keywords: E23; F21; F30; L96; O55
    Date: 2022–01
  15. By: Agostino Capponi; Ruizhe Jia; Ye Wang
    Abstract: Transactions submitted through the blockchain peer-to-peer (P2P) network may leak out exploitable information. We study the economic incentives behind the adoption of blockchain dark venues, where users' transactions are observable only by miners on these venues. We show that miners may not fully adopt dark venues to preserve rents extracted from arbitrageurs, hence creating execution risk for users. The dark venue neither eliminates frontrunning risk nor reduces transaction costs. It strictly increases the payoff of miners, weakly increases the payoff of users, and weakly reduces arbitrageurs' profits. We provide empirical support for our main implications, and show that they are economically significant. A 1% increase in the probability of being frontrun raises users' adoption rate of the dark venue by 0.6%. Arbitrageurs' cost-to-revenue ratio increases by a third with a dark venue.
    Date: 2022–02
  16. By: Teng Andrea Xu; Jiahua Xu
    Abstract: Decentralized Finance (DeFi) services are moving traditional financial operations to the Internet of Value (IOV) by exploiting smart contracts, distributed ledgers, and clever heterogeneous transactions among different protocols. The exponential increase of the Total Value Locked (TVL) in DeFi foreshadows a bright future for automated money transfers in a plethora of services. In this short survey paper, we describe the business model for different DeFi domains - namely, Protocols for Loanable Funds (PLFs), Decentralized Exchanges (DEXs), and Yield Aggregators. We claim that the current state of the literature is still unclear how to value thousands of different competitors (tokens) in DeFi. With this work, we abstract the general business model for different DeFi domains and compare them. Finally, we provide open research challenges that will involve heterogeneous domains such as economics, finance, and computer science.
    Date: 2022–02
  17. By: Rivera Moreno, Pablo Nebbi; Triana Montaño, Karol Lorena
    Abstract: Central Bank Digital Currency (CBDC) has been in the center of discussion of many monetary policy research agendas. We explore how the business cycle behavior of a developing economy is affected by the introduction of this type of money as a second monetary policy tool. We emphasize on the characteristic dual formal and informal labor markets that are present in most developing economies, given its relevance on explaining the business cycle dynamics. Our main contribution is the building of a model that encompasses such characteristics and features the relevance of monetary balances to macroeconomic fluctuations. We find that CBDC has the ability to improve the monetary policy effectiveness, and the response of relevant variables may be amplified or dampened, depending on the nature of the shock. Also the magnitude of the new dynamics introduced by CBDC are also profoundly dependant on its structural parameters. The main transmission mechanisms that are affected by CBDC are the dynamics of distortions generated by transaction costs.
    Date: 2022–04
  18. By: Wataru Takahashi (Faculty of Economics, Osaka University of Economics and Research Fellow, Research Institute for Economics and Business Administration, Kobe University, JAPAN); Taiji Inui (Japan International Cooperation Agency and Asia Development Bank (ADB), JAPAN)
    Abstract: This paper proposes “Asia Digital Common Currency (ADCC)” aiming at fostering Asian financial markets. We are proposing to issue a digital common currency controlled and managed under multilateral governance framework. As a result, the international currency, which should be an international public good, will be governed by a multilateral system. Under our proposed ADCC, each member country can carry out monetary policy independently. It also has a mechanism to maintain currency sovereignty in digital era. In addition, ADCC will contribute to the development of financial market infrastructures in Asia. It will foster the bond markets and standardize the Asian financial system. Asia lags behind Europe in monetary integration, but historically had experiences in common currency circulation. ADCC is an idea that should be thoroughly considered in order to develop the Asian and Japanese economies in the digital age.
    Keywords: Digital currency; Common currency; International currency as an international public good; Currency sovereignty (Münzhoheit); Anonymity; Independence of monetary policy
    JEL: E42 F33 F36
    Date: 2022–03
  19. By: KAWASHIMA Fujio
    Abstract: Since December 2020 when the Central Political Bureau of the Communist Party of China and the Central Economic Work Council adopted a priority policy to ‘strengthen the Anti-Monopoly and prevent disorderly expansion of capital,’ regulation based on the Anti-Monopoly Law has actually been strengthened, particularly against digital platform businesses such as Alibaba and Tencent, who had been regarded as operating outside of the scope of its regulation and thus as ‘sanctuary’ businesses. This discussion paper firstly examines the background behind the strengthening of its regulation and secondly introduces and analyzes concrete cases of the application of the Anti-Monopoly Law regulation against digital platform business. Thirdly, it introduces the trends in the application of the regulations of other laws such as the Network Security Law to such business and clarifies the trends and characteristics related to the Antimonopoly Law regulations in comparison with other regulations. Towards the design and creation of multilateral rules on digital trade, this discussion paper's examination has practical implications as a foundational work, describing the state-of-play of relevant regulations in China, which can significantly affect the future direction of said rules.
    Date: 2021–03
  20. By: Karunakaran, Arvind; Orlikowski, Wanda J.; Scott, Susan V.
    Abstract: Organizational accountability is considered critical to organizations' sustained performance and survival. Prior research examines the structural and rhetorical responses that organizations use to manage accountability pressures from different constituents. With the emergence of social media, accountability pressures shift from the relatively clear and well-specified demands of identifiable stakeholders to the unclear and unspecified concerns of a pseudonymous crowd. This is further exacerbated by the public visibility of social media, materializing as a stream of online commentary for a distributed audience. In such conditions, the established structural and rhetorical responses of organizations become less effective for addressing accountability pressures. We conducted a multisite comparative study to examine how organizations in two service sectors (emergency response and hospitality) respond to accountability pressures manifesting as social media commentary on two platforms (Twitter and TripAdvisor). We find organizations responding online to social media commentary while also enacting changes to their practices that recalibrate risk, redeploy resources, and redefine service. These changes produce a diffractive reactivity that reconfigures the meanings, activities, relations, and outcomes of service work as well as the boundaries of organizational accountability. We synthesize these findings in a model of crowd-based accountability and discuss the contributions of this study to research on accountability and organizing in the social media era.
    Keywords: digital technology; field study; occupations and professions; organization and management theory; practice; qualitative research; research design and methods; social media
    JEL: R14 J01
    Date: 2022–01–01
  21. By: Piolatto, A. (Tilburg University, School of Economics and Management); Schuett, Florian (Tilburg University, School of Economics and Management)
    Date: 2022
  22. By: Noack, Anika
    Abstract: Even before the corona pandemic broke out in 2020, the role of digitalisation became more and more apparent within Knowledge and Technology Transfer (KTT) processes. Since the pandemic,intermediary organisations that bridge the distance between academia and the world of business to pave the way for successful university-industry linkages have not primarily been able to build on face-to-face-encounters to create those relations. Based on an ongoing research project, this paper examines how digitally mediated communications potentially enhance or limit knowledge and technology transfer that is primarily based on face-to-face interactions.On the one hand, the use of digitally mediated communications seem to foster the spatial expansion of networks, save travel times and costs and foster a special form of social inclusion. University-industry-relations, on the other hand,still rely on a positive evaluation of face-to-face contacts and geographical proximity for trust to develop between heterogeneous partners. Here, actors with bridging functions like transfer scouts are vital in enabling a regular communicative exchange to create commitment, social cohesion and cooperation in digital contexts. Although the relevance of digitalised transfer processes has been increasing over time, an important set of activities, involving face-to-face contacts and co-location, currently still plays a major role for transfer intermediaries in university-industry-relations.
    Keywords: Knowledge and technology transfer (KTT),transfer intermediaries,face-to-faceinteractions,mutual trust,focused ethnography
    Date: 2022
  23. By: Dorine CORNET (Université Paris 1 Panthéon-Sorbonne, 106-112 bd de l'Hôpital, 75642 Paris Cedex 13); Jean BONNET (Normandie Univ, Unicaen, CNRS, CREM, Esplanade de la Paix, 14032 CAEN cedex 5); Sébastien BOURDIN (EM Normandie Business School, Métis Lab, 9 rue Claude Bloch, 14 000 Caen)
    Abstract: The DIGITAL ENTREPRENEURSHIP INDICATOR (DEI), which combines individual and institutional data, is designed to chart the vitality of metropolitan areas in terms of digital entrepreneurship on a suburban scale. In this study, we apply it to the case of the Greater Paris Metropolitan area. Using geographically weighted regression, we explore the spatial heterogeneity of the effect of digital entrepreneurial ecosystems on the location quotient of information and communication technology firms with fewer than 10 employees. The results highlight a positive link between the DEI and the location quotient of small ICT firms. In particular, the aspects of both ATTitudes and CAPacities (i.e., urbanization economies, Human Development Index, density of incubators, accounting and financial services, and fiber optic coverage) appear to have a significant effect on a suburban scale.
    Keywords: digital entrepreneurial ecosystem, urban area, innovation, spatial econometrics
    JEL: R12 L26 O31 P25
    Date: 2022–04
  24. By: Huang, Kun.; Elder, Sara
    Abstract: For many years, wage arrears have been a prevalent problem facing rural migrant workers in the construction sector in China. The difficulties of addressing wage arrears are multifaceted, but are clearly exacerbated by the complex layering of subcontracting that occurs in construction sector. In recent years, China adopted a series of policies and laws to facilitate the timely and full wage payment to migrant workers.With the legal framework in place, central and local governments of China have implemented solutions to improve the efficiency of labour inspection system in addressing wage arrears, thanks to the application of digital technologies. This paper examines how technology was put to use in the design and implementation of an online information platform—National Construction Workers Management and Service Information System — that registers rural migrant workers and ultimately brings them under the realm of public policy to protect them against abuses. The paper examines in detail the Enterprise Wage Payment Online Supervision System (EWPOSS) of Zhejiang Province and analyses how the IT-enabled system has contributed to improving the efficiency of the local labour inspectorates in addressing wage arrears. The paper concludes that digital solutions offer great potential to tackle negative aspects associated to informality if accompanied by adequate policy and legal frameworks, sound digital infrastructure and effective and robust labour inspection systems.
    Date: 2022
  25. By: Lukac, Martin; Grow, André
    Abstract: Online labor markets—freelance marketplaces, where digital labor is distributed via a web-based platform—commonly use reputation systems to overcome uncertainties in the hiring process, that can arise from a lack of objective information about employees’ abilities. Research shows, however, that reputation systems tend to create winner-takes-all dynamics, in which differences in candidates’ reputations become disconnected from differences in their objective abilities. In this paper, we use an empirically validated agent-based computational model to investigate the extent to which reputation systems can create segmented hiring patterns that are biased toward freelancers with good reputation. We explore how jobs and earnings become distributed on a stylized platform, under different contextual conditions of information asymmetry. Our results suggest that information asymmetry influences the extent to which reputation systems may lead to inequality between freelancers, but contrary to our expectations, lower levels of information asymmetry can facilitate higher inequality in outcomes.
    Keywords: agent-based modeling; economic sociology; gig economy; inequality; online labor markets; reputation systems
    JEL: R14 J01
    Date: 2020–08–02
  26. By: Dominic A. Smith; Sergio Ocampo
    Abstract: Increases in national concentration have been a salient feature of industry dynamics in the U.S. and have contributed to concerns about increasing market power. Yet, local trends may be more informative about market power, particularly in the retail sector where consumers have traditionally shopped at nearby stores. We find that local concentration has increased almost in parallel with national concentration using novel Census data on product-level revenue for all U.S. retail stores. The increases in concentration are broad based, affecting most markets, products, and retail industries. We implement a new decomposition of the national Herfindahl-Hirschman Index and show that despite similar trends, national and local concentration reflect different changes in the retail sector. The increase in national concentration comes from consumers in different markets increasingly buying from the same firms and does not reflect changes in local market power. We estimate a model of retail competition which links local concentration to markups. The model implies that the increase in local concentration explains one-third of the observed increase in markups.
    Date: 2022–02
  27. By: James Chapman; Ajit Desai
    Abstract: Predicting the economy’s short-term dynamics—a vital input to economic agents’ decision-making process—often uses lagged indicators in linear models. This is typically sufficient during normal times but could prove inadequate during crisis periods such as COVID-19. This paper demonstrates: (a) that payments systems data which capture a variety of economic transactions can assist in estimating the state of the economy in real time and (b) that machine learning can provide a set of econometric tools to effectively handle a wide variety in payments data and capture sudden and large effects from a crisis. Further, we mitigate the interpretability and overfitting challenges of machine learning models by using the Shapley value-based approach to quantify the marginal contribution of payments data and by devising a novel cross-validation strategy tailored to macroeconomic prediction models.
    Keywords: Business fluctuations and cycles; Econometric and statistical methods; Payment clearing and settlement systems
    JEL: C53 C55 E37 E42 E52
    Date: 2022–03
  28. By: Dini, Marco; Gligo, Nicolo; Patiño, Alejandro
    Abstract: En esta publicación se brindan a los encargados de formular políticas de fomento productivo herramientas conceptuales y prácticas para analizar el proceso de transformación digital de las empresas de América Latina y el Caribe y para diseñar políticas que faciliten dicha transformación. Se analiza la heterogeneidad del proceso de penetración de las tecnologías digitales, que se relaciona, entre otros factores, con el tamaño de las empresas y con el grado de madurez de la tecnología considerada. Se dedica especial atención a las tecnologías digitales más avanzadas que se relacionan con la denominada cuarta revolución industrial. Además, se sintetizan antecedentes empíricos y contribuciones de la literatura sobre motivaciones y obstáculos que las empresas enfrentan en su proceso de transformación digital y se analizan los avances de las políticas digitales adoptadas en la región. Por último, se presenta un conjunto de conceptos, preguntas y distinciones que pueden contribuir al diseño de políticas para la transformación digital de las empresas. Esta publicación es parte de las actividades desarrolladas por el proyecto EUROMIPYME, financiado por la Unión Europea.
    Date: 2021–08–25
  29. By: Shai Bernstein; Kunal Mehta; Richard R. Townsend; Ting Xu
    Abstract: We analyze a field experiment conducted on AngelList Talent, a large online search platform for startup jobs. In the experiment, AngelList randomly informed job seekers of whether a startup was funded by a top-tier investor and/or was funded recently. We find that the same startup receives significantly more interest when information about top-tier investors is provided. Information about recent funding has no effect. The effect of top-tier investors is not driven by low-quality candidates and is stronger for earlier-stage startups. The results show that venture capitalists can add value passively, simply by attaching their names to startups.
    JEL: C93 G24 J22 J24 L26
    Date: 2022–03
  30. By: O'Higgins, Niall.; Pinedo Caro, Luis.
    Abstract: In recent years, crowdworking has emerged as a small but rapidly growing source of employment and income principally for young(er) people. Here, we build on previous work in identifying the determinants of crowdworkers’ earnings. We focus on the reasons why young crowdworkers earn significantly higher hourly wages than their older counterparts. We show that this is due to the higher returns to experience accruing to younger crowd-workers. Educational attainment does not explain this age-based differential, as education is a negligible factor in determining crowdworkers’ earnings. We also analyse why young women earn around 20% less than their male counterparts despite blind hiring. We confirm that this is partly explained by constraints on working time faced by women with children. The analysis also shows that ‘freely chosen’ crowd work - as opposed to, young people crowd-working because of a lack of alternative employment opportunities - is conducive to higher levels of job satisfaction. Moreover, young crowdworkers in middle income countries earn less than their counterparts in high income countries but report higher levels of job satisfaction. This is entirely attributable to the lower quality of their options outside of crowdwork.
    Date: 2022
  31. By: Victor Aguirregabiria; Francis Guiton
    Abstract: This paper examines the effects of decentralizing decision-making in multi-establishment firms. Using a unique dataset from the Liquor Control Board of Ontario (LCBO), we assess the impact of allowing store managers to control the inventory replenishment decisions of their stores. We first present evidence of strong heterogeneity across the inventory decisions of the 634 store managers in the retail chain. We then study the sources of this heterogeneity by focusing on differences across stores in the structure of the profit function. We estimate a separate dynamic structural model of inventory management for each store manager in the retail chain using two years of daily data. We find very substantial heterogeneity across stores in unit costs of holding inventory, placing orders, and stockouts, and in fixed ordering costs. Using counterfactual experiments based on the estimated model, we find that a centralized inventory management system would yield a 0.4% increase in annual profit for LCBO, equivalent to $6.8 million. This modest effect is the result of combining two substantial effects with opposite signs: the negative effect of delaying the processing of information is more than compensated by the large reduction in ordering and storage costs from eliminating store managers' behavioral biases and heterogeneous skills (i.e., 25.5% on average, 6.3% for the median store). Furthermore, the gains from centralization are very heterogeneous across stores in the retail chain, with both very substantial losses and gains. These distributional effects within multi-divisional companies can be relevant when deciding whether to adopt an organizational change.
    Keywords: Inventory management; Dynamic structural model; Decentralization; Information processing in organizations; Retail chains; Managerial skills; Store managers
    JEL: D22 D25 D84 L22 L81
    Date: 2022–03–27
  32. By: Christian Esposito; Marco Gortan; Lorenzo Testa; Francesca Chiaromonte; Giorgio Fagiolo; Andrea Mina; Giulio Rossetti
    Abstract: In this paper we characterize the performance of venture capital- backed firms based on their ability to attract investment. The aim of the study is to identify relevant predictors of success built from the network structure of firms' and investors' relations. Focusing on deal-level data for the health sector, we first create a bipartite network among firms and investors, and then apply functional data analysis (FDA) to derive progressively more refined indicators of success captured by a binary, a scalar and a functional outcome. More specifically, we use different network centrality measures to capture the role of early investments for the success of the firm. Our results, which are robust to different specifications, suggest that success has a strong positive association with centrality measures of the firm and of its large in- vestors, and a weaker but still detectable association with centrality measures of small investors and features describing firms as knowl- edge bridges. Finally, based on our analyses, success is not associated with firms' and investors' spreading power (harmonic centrality), nor with the tightness of investors' community (clustering coefficient) and spreading ability (VoteRank).
    Keywords: Network analysis; functional data analysis; venture capital; investment trajectory.
    Date: 2022–02–28

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.