Template-Type: ReDIF-Paper 1.0 Title: Money in the Search for a Nominal Anchor Author-Name: Peter N. Ireland Author-X-Name-First: Peter Author-X-Name-Last: Ireland Author-Person: pir1 Author-Email: peter.ireland@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: From the very start of its fifty-year history, the Shadow Open Market Committee advocated for a monetary policy strategy focused on controlling inflation. With time, the rationale for price stability as the principal focus of monetary policy came to be accepted more widely by academic economists and Federal Reserve officials as well. The SOMC also consistently favored an operational approach involving the use of the monetary base as the policy instrument and a broader monetary aggregate as an intermediate target. These features of SOMC strategy, by contrast, have never gained widespread support among academics or at the Fed. This paper outlines the SOMC’s preferred approach, focusing on how the Committee’s money- based strategy and arguments for it evolved over time. It then shows that these arguments still apply with force today. Classification-JEL: B22, B31, E31, E51, E52, E58 Keywords: Inflation, Money Growth, Monetary Policy, Monetarism, Shadow Open Market Committee Series: Boston College Working Papers in Economics Number: 1078 Creation-Date: 20240701 File-URL: http://fmwww.bc.edu/EC-P/wp1078.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:1078 Template-Type: ReDIF-Paper 1.0 Title: A Model of Information Nudges Author-Name: Lucas Coffman Author-X-Name-First: Lucas Author-X-Name-Last: Coffman Author-Person: pco542 Author-Email: coffmanl@bc.edu Author-WorkPlace-Name: Boston College Author-Name: Clayton R. Featherstone Author-X-Name-First: Clayton Author-X-Name-Last: Featherstone Author-Email: clayton_featherstone@baylor.edu Author-WorkPlace-Name: Baylor University Author-Person: pfe624 Author-Name: Judd B. Kessler Author-X-Name-First: Judd Author-X-Name-Last: Kessler Author-Email: judd.kessler@wharton.upenn.edu Author-WorkPlace-Name: The Wharton School, University of Pennsylvania Abstract: Nudge-style interventions are popular but are often criticized for being atheoretical. We present a model of information nudges (i.e., interventions that provide useful but imperfect information about the utility of taking an action) based on Bayesian updating in a setting of binary choice. The model makes two main predictions: One, the probability of a positive treatment effect should be increasing in the baseline take-up rate. Two, across studies, as baseline rates increase from 0 to 1, the expected treatment effect has a "down–up–down" shape. A surprising corollary of both predictions is that treatment effects are expected to be negative for low baseline rates. We use reduced-form and structural methods to conduct a meta-analysis of 75 information nudges and corroborate both predictions. Both the meta-analysis and a novel survey of nudge experts suggest the intuition in the model is not currently known. Finally, we provide guidance for practitioners about the environments in which information nudges will positively affect a desired behavior and those in which they may backfire. Keywords: nudges, interventions, Bayesian updating Classification-JEL: C90, D04 Series: Boston College Working Papers in Economics Number: 1077 Creation-Date: 20240701 File-URL: http://fmwww.bc.edu/EC-P/wp1077.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:1077 Template-Type: ReDIF-Paper 1.0 Title: Occupational Choice, Human Capital and Learning: A Multi-Armed Bandit Approach Author-Name: Rafael Lopes de Melo Author-X-Name-First: Rafael Author-X-Name-Last: de Melo Author-Email: rafael.lopes@ed.ac.uk Author-WorkPlace-Name: University of Edinburgh Author-Name: Theodore Papageorgiou Author-X-Name-First: Theodore Author-X-Name-Last: Papageorgiou Author-Person: ppa842 Author-Email: theodore.papageorgiou@bc.edu Author-WorkPlace-Name: Boston College Abstract: This paper introduces a model of worker matching at the occupation level. In our setup, young workers, while employed in an occupation, accumulate human capital and also learn about their underlying productivity in that occupation. Human capital is partially transferable to other occupations and similarly, the information acquired in one occupation is useful for the worker’s productivity elsewhere. Workers with low tenure levels, as well as low-paid workers, are the ones most likely to switch occupations, consistent with our empirical findings. Though the model is quite general, we show that Gittins indices can be used in this setup to preserve tractability. We discuss potential applications ranging from assessing the impact of AI and automation to the evaluation of policies such as unemployment benefits, sector-specific subsidies, or minimum wages. Keywords: Human Capital, Occupations, Multi-armed Bandits, Worker Mobility, Learning, Information and Human Capital Spillovers, Wage Inequality, Gittins Index. Classification-JEL: J24, J31, J62 Series: Boston College Working Papers in Economics Number: 1076 Creation-Date: 20240610 File-URL: http://fmwww.bc.edu/EC-P/wp1076.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:1076 Template-Type: ReDIF-Paper 1.0 Title: Commercial Rivalry as Seller Incidence Shifting: Non-parametric Accounting of the China Shock Author-Name: James E. Anderson Author-X-Name-First: James Author-X-Name-Last: Anderson Author-Person: pan2 Author-Email: anderson@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: Intense US-China commercial rivalry is quantified in this paper with novel non-parametric relative resistance sufficient statistics. The accounting method minimizes the demand specification error variance in revealed resistances. China’s manufacturing seller incidence falls (seller price rises) 7.6% yearly as China’s sales share quadruples over 2000-14. US seller incidence rises 4.1% yearly as US sales share halves. Domestic trade shares closely fit revealed relative resistances with trade elasticity equal to one. Industrial policy pays for itself in suggestive projections. A 10% rise in US 2014 sales share reduces seller incidence 6.0%, exports rise and net benefit is positive. Series: Boston College Working Papers in Economics Number: 1075 Creation-Date: 20240529 Keywords: Non-parametric, seller incidence, terms of trade Classification-JEL: F10, F14 File-URL: http://fmwww.bc.edu/EC-P/wp1075.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:1075 Template-Type: ReDIF-Paper 1.0 Title: Non-Binary Gender Economics Author-Name: Katherine B Coffman Author-X-Name-First: Katherine Author-X-Name-Last: Coffman Author-Email: kcoffman@hbs.edu Author-WorkPlace-Name: Harvard Business School Author-Name: Lucas Coffman Author-X-Name-First: Lucas Author-X-Name-Last: Coffman Author-Person: pco542 Author-Email: coffmanl@bc.edu Author-WorkPlace-Name: Boston College Author-Name: Keith Marzilli Ericson Author-X-Name-First: Keith Author-X-Name-Last: Ericson Author-Email: per105 Author-WorkPlace-Name: Boston University Questrom School of Business Author-Email: kericson@bu.edu Abstract: Economics research has largely overlooked non-binary individuals. We provide data on many of their economically-important beliefs and preferences. Non-binary individuals report more gender-based discrimination and less workplace inclusion than men or women. Anti-non-binary sentiment is stronger than anti-LGBT sentiment, and strongest among men. Non-binary respondents report lower assertiveness and confidence. They have different career and life aspirations, valuing career prosociality more and having children less. Their social preferences are similar to men’s and less prosocial than women’s, with age an important moderator. Stereotypes are inaccurate, as respondents often mistake the direction of group gender differences or exaggerate their size. Keywords: Gender differences, Non-binary gender, Experiments, Labor Classification-JEL: C90, D10, J10 Series: Boston College Working Papers in Economics Number: 1074 Creation-Date: 20240301 Revision-Date: 20240701 File-URL: http://fmwww.bc.edu/EC-P/wp1074.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:1074 Template-Type: ReDIF-Paper 1.0 Title: Sending out an SMS: Automatic Enrollment Experiments for Overdraft Alerts Author-Name: Michael Grubb Author-X-Name-First: Michael Author-X-Name-Last: Grubb Author-Person: pgr239 Author-Email: michael.grubb@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Darragh Kelly Author-X-Name-First: Darragh Author-X-Name-Last: Kelly Author-Workplace-Name: Google Author-Name: Jeroen Niebohr Author-X-Name-First: Jeroen Author-X-Name-Last: Niebohr Author-Workplace-Name: London School of Economics Author-Name: Matthew Osborne Author-X-Name-First: Matthew Author-X-Name-Last: Osborne Author-Workplace-Name: University of Toronto Author-Person: pos41 Author-Name: Jonathan Shaw Author-X-Name-First: Jonathan Author-X-Name-Last: Shaw Author-Workplace-Name: UK Financial Conduct Authority Author-Person: psh838 Series: Boston College Working Papers in Economics Number: 1073 Abstract: At-scale field experiments at major UK banks show that automatic enrollment into “just-in-time” text message alerts reduces unarranged overdraft and unpaid item charges 17–19% and arranged overdraft charges 4–8%, implying annual market-wide savings of £170–240 million. Incremental benefits from additional “early warning” alerts, triggered by low account balances are not statistically significant, although economically significant effects are not ruled out. Prior to the experiments, over half of overdrafting could have been avoided by using lower-cost liquidity available in savings and credit card accounts (FCA, 2018c). Alerts help consumers achieve less than half of these potential savings. Creation-Date: 20240508 Classification-JEL: D14, D18, G21, G28, G51 Keywords: overdraft fees, early warning alerts, liquidity Publication-status: forthcoming, Journal of Finance File-URL: http://fmwww.bc.edu/EC-P/wp1073.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:1073 Template-Type: ReDIF-Paper 1.0 Title: Investment in Infrastructure and Trade: The Case of Ports Author-Name: Giulia Brancaccio Author-X-Name-First: Giulia Author-X-Name-Last: Brancaccio Author-Email: giulia.brancaccio@cornell.edu Author-WorkPlace-Name: New York University Author-Name: Myrto Kalouptsidi Author-X-Name-First: Myrto Author-X-Name-Last: Kalouptsidi Author-Email: myrto@fas.harvard.edu Author-WorkPlace-Name: Harvard University Author-Name: Theodore Papageorgiou Author-X-Name-First: Theodore Author-X-Name-Last: Papageorgiou Author-Person: ppa842 Author-Email: theodore.papageorgiou@bc.edu Author-WorkPlace-Name: Boston College Abstract: Transportation infrastructure is vital for the smooth functioning of international trade. Ports are a crucial gateway to this system: with more than 80% of trade carried by ships, they shape trade costs, and it is critical that they operate efficiently. Yet ports are susceptible to disruptions, causing costly delays. With enormous budgets spent on infrastructure to alleviate these costs, a key policy question emerges: in a world with high volatility, what are the returns to investing in infrastructure? To address this question, we introduce an empirical framework that combines insights from queueing theory to capture port technology, with tools from demand estimation. We use our framework, together with a collection of novel datasets, to quantify the costs of disruptions and evaluate transportation infrastructure investment. Our analysis unveils three policy-relevant messages: (i) investing in port infrastructure can lead to substantial trade and welfare gains, but only if targeted properly– in fact, net of costs, investment has positive returns at a minority of US ports; (ii) there are sizable spillovers across ports, as investing in one port can decongest a wider set of ports, suggesting that decision-making should not be decentralized to local authorities; (iii) macroeconomic volatility can drastically change returns to investment and their geography. Keywords: transportation, infrastructure, ports, congestion, macroeconomic volatility, disruptions, spillovers, welfare Classification-JEL: E39, F1, F14, L0, L90, L91, R4, R41, R42 Series: Boston College Working Papers in Economics Number: 1072 Creation-Date: 20240510 File-URL: http://fmwww.bc.edu/EC-P/wp1072.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:1072 Template-Type: ReDIF-Paper 1.0 Title: Alliance Formation in a Multipolar World Author-Name: Peter Devine Author-X-Name-First: Peter Author-X-Name-Last: Devine Author-Person: Author-Email: peter.devine.2@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Sumit Joshi Author-X-Name-First: Sumit Author-X-Name-Last: Joshi Author-Workplace-Name: George Washington University Author-Email: sumjos@gwu.edu Author-Person: pjo232 Author-Name: Ahmed Saber Mahmud Author-X-Name-First: Ahmed Author-X-Name-Last: Mahmud Author-Email: asaber1973@gmail.com Author-WorkPlace-Name: Virginia Polytechnic Institute and State University Series: Boston College Working Papers in Economics Number: 1071 Abstract: We propose a multilayer network approach to alliance formation. In a signed affinity layer, agents are partitioned into clusters, with friendly relations within and hostile connections across clusters. Agents then form defensive collaborations in an alliance layer as follows: Agents in the same cluster form a nested split graph with degree inversely correlated to the level of hostility, and agents from disparate clusters with high-degree and low-hostility form cliques. Within cliques, agents from a cluster that is "intermediate" in terms of discord serve as a bridge to interconnect agents from more "extreme" clusters. Creation-Date: 20240510 Classification-JEL: C72, D74, D85 Keywords: Alliance formation, signed graphs, nested split graphs, pairwise stability, cliques Publication-status: forthcoming, Journal of Economic Behavior and Organization File-URL: http://fmwww.bc.edu/EC-P/wp1071.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:1071 Template-Type: ReDIF-Paper 1.0 Title: Collective Behavior with Information Asymmetry Author-Name: Zhi Cao Author-X-Name-First: Zhi Author-X-Name-Last: Cao Author-WorkPlace-Name: Chinese University of Hong Kong Author-Email: zhicao@link.cuhk.edu.hk Author-Name: Arthur Lewbel Author-X-Name-First: Arthur Author-X-Name-Last: Lewbel Author-Person: ple43 Author-Email: lewbel@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Wenchao Li Author-X-Name-First: Wenchao Author-X-Name-Last: Li Author-WorkPlace-Name: Tongji University Author-Email: wenchaoli.1022@gmail.com Author-Name: Junjian Yi Author-X-Name-First: Junjian Author-X-Name-Last: Yi Author-WorkPlace-Name: Peking University Author-Email: junjian.yi@gmail.com Abstract: We propose a new method for identifying bargaining power in collective house- hold models, based on information asymmetry. Our model allows household members to exploit an information advantage for bargaining. We formulate the household’s decision process under partial information disclosure using a Bayesian persuasion framework. We use this structure to point identify utility and bargaining power, which would not be identified under symmetric information. We illustrate these results by showing that our model can ex- plain known empirical outcomes regarding child educational investment and development in Chinese households where one parent is a migrant. Keywords: Collective model; Information asymmetry; Bargaining power; Bayesian persuasion; Left-behind children Classification-JEL: D11; D13; D82; J13D11; D13; D82; J13 Series: Boston College Working Papers in Economics Number: 1070 Creation-Date: 20240426 File-URL: http://fmwww.bc.edu/EC-P/wp1070.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:1070 Template-Type: ReDIF-Paper 1.0 Title: Matching under Non-transferable Utility: Applications Author-Name: Tayfun Sönmez Author-X-Name-First: Tayfun Author-X-Name-Last: Sönmez Author-Email: sonmezt@bc.edu Author-Person: psi57 Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: M. Utku Ünver Author-X-Name-First: M. Author-X-Name-Last: Ünver Author-Person: pun2 Author-Email: unver@bc.edu Author-Workplace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: We survey the literature on applications of matching theory under non- transferable utility. We cover the following six applications in detail: living-donor kid- ney exchange, living-donor liver exchange, cadet-branch matching in the US Army, affirmative action in India, matching market for entry-level physicians in the US, and course allocation at universities. We also survey other notable applications. Keywords: Matching Theory, Market Design, Kidney Exchange, Liver Exchange, Cadet- Branch Matching, Affirmative Action in India, Matching for Residency Programs, NRMP, Unraveling, Course Allocation, College Admissions, School Choice, Pandemic Resource Al- location, Reserve Systems, Matching under Distributional Constraints, Matching with Reassignment, Balancedness in Matching, Refugee Resettlement Series: Boston College Working Papers in Economics Number: 1069 Creation-Date: 20240415 Classification-JEL: C78, D47 File-URL: http://fmwww.bc.edu/EC-P/wp1069.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:1069 Template-Type: ReDIF-Paper 1.0 Title: Matching under Non-transferable Utility: Theory Author-Name: Tayfun Sönmez Author-X-Name-First: Tayfun Author-X-Name-Last: Sönmez Author-Email: sonmezt@bc.edu Author-Person: psi57 Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: M. Utku Ünver Author-X-Name-First: M. Author-X-Name-Last: Ünver Author-Person: pun2 Author-Email: unver@bc.edu Author-Workplace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: We survey the literature on matching theory under non-transferable utility using a classification based on property rights (i) with private ownership, (ii) with common and mixed ownership, and (iii) under priority-based entitlements. Keywords: Matching Theory, Housing Markets, Two-sided Matching, Roommates Problem, Kidney Exchange, House Allocation, Student Placement, Reserve Systems Series: Boston College Working Papers in Economics Number: 1068 Creation-Date: 20240415 Classification-JEL: C78, D47 File-URL: http://fmwww.bc.edu/EC-P/wp1068.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:1068 Template-Type: ReDIF-Paper 1.0 Title: Drivers of COVID-19 in U.S. counties: A wave-level analysis Author-Name: Christopher F Baum Author-X-Name-First: Christopher Author-X-Name-Last: Baum Author-Person: pba1 Author-Email: baum@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Andrés Garcia-Suaza Author-X-Name-First: Andrés Author-X-Name-Last: Garcia-Suaza Author-Person: pga253 Author-Workplace-Name: Facultad de Economía, Universidad del Rosario Author-Name: Miguel Henry Author-X-Name-First: Miguel Author-X-Name-Last: Henry Author-Email: mhenry@quanteconresearch.com Author-Workplace-Name: QuantEcon Research Author-Person: phe668 Author-Name: Jesús Otero Author-X-Name-First: Jesús Author-X-Name-Last: Otero Author-Person: pot11 Author-Workplace-Name: Facultad de Economía, Universidad del Rosario Abstract: Since the initial outbreak of COVID-19 in the United States, researchers from a variety of scientific disciplines have sought to understand the factors influencing the evolu- tion of cases and fatalities. This paper proposes a two-stage econometric modeling approach to analyze a range of socioeconomic, demographic, health, epidemiological, climate, pollution, and political factors as potential drivers of the spread of COVID- 19 across waves and counties in the United States. The two-step modeling strategy allows us to (i) accommodate the observed heterogeneity across waves and counties in the transmissibility of the virus, and (ii) assess the relative importance of the cross- sectional measures. We leverage the availability of daily data on confirmed cases and deaths of COVID-19 in counties across the 48 contiguous states and the District of Columbia, spanning a two-year period from March 2020 to March 2022. We find that socioeconomic and demographic factors generally had the greatest influence on the transmissibility of the virus and the associated mortality risk, with health and climate factors playing a lesser role. Keywords: COVID-19, coronavirus, geographic heterogeneity, covariate selection Classification-JEL: C13, C21, R15, R23 Series: Boston College Working Papers in Economics Number: 1067 Creation-Date: 20240413 File-URL: http://fmwww.bc.edu/EC-P/wp1067.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:1067 Template-Type: ReDIF-Paper 1.0 Title: Adverse Childhood Experiences and Long-term Economic Well-being: Understanding Mechanisms to Explain Group Differences in Net Worth Author-Name: Scott D. Easton Author-X-Name-First: Scott Author-X-Name-Last: Easton Author-Workplace-Name: Boston College Author-Email: scott.easton@bc.edu Author-Name: Geoffrey T. Sanzenbacher Author-X-Name-First: Geoffrey Author-X-Name-Last: Sanzenbacher Author-Person: psa1308 Author-Email: geoffrey.sanzenbacher@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Series: Boston College Working Papers in Economics Number: 1066 Abstract: Past research has documented that Adverse Childhood Experiences (ACEs) impact cognition, education, relationship stability, employment, and earnings. Less research has focused on how these impacts affect measures of long-term economic well-being that capture cumulative disadvantage. This study therefore uses the National Longitudinal Study of Youth 1979 Cohort to investigate the net worth of individuals near the end of their careers, comparing those with and without ACEs. The study uses a Blinder-Oaxaca Decomposition to investigate the underlying mechanisms for any group differences. The findings suggest that observed differences in education, marital instability, and lifetime earnings explain significant portions of the net worth disparities between those with and without ACEs. The fact that those experiencing ACEs also get less out of normally beneficial aspects of their families – such as higher income – also plays a significant role. The results suggest that no “silver bullet” exists to reduce the impact of ACEs on long-term economic well-being. Interventions that simultaneously prevent child maltreatment and increase social and emotional development – like high-quality preschool – are more likely to be effective than those targeting any single aspect of individuals’ lives. Creation-Date: 20240303 Classification-JEL: J12, J24, D3 Keywords: Adverse Childhood Experiences, Wealth Inequality, Cumulative Disadvantage File-URL: http://fmwww.bc.edu/EC-P/wp1066.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:1066 Template-Type: ReDIF-Paper 1.0 Title: Allocation Mechanisms with Mixture-Averse Preferences Author-Name: David Dillenberger Author-X-Name-First: David Author-X-Name-Last: Dillenberger Author-Workplace-Name: University of Pennsylvania Author-Email: ddill@sas.upenn.edu Author-Name: Uzi Segal Author-X-Name-First: Uzi Author-X-Name-Last: Segal Author-Person: pse40 Author-Email: uzi.segal@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Series: Boston College Working Papers in Economics Number: 1065 Abstract: Consider an economy with equal amounts of N types of goods, to be allocated to agents with strict quasi-convex preferences over lotteries. We show that ex-ante, all feasible and Pareto efficient al- locations give almost all agents a binary lottery. Therefore, even if all preferences are the same, some identical agents necessarily receive different lotteries. Our results imply that many of the popular alloca- tion mechanisms used in practice are not ex-ante efficient. Assuming the reduction of compound lotteries axiom, social welfare deteriorates by first randomizing over these binary lotteries. Full ex-ante equality can be achieved if agents satisfy the compound independence axiom. Creation-Date: 20240303 Classification-JEL: C78, D61, D81 Keywords: Allocation Problem, Binary Lotteries, Ex-Ante Efficiency, Matching, No-Envy, Non-Expected Utility, Quasi-Convex Preferences. File-URL: http://fmwww.bc.edu/EC-P/wp1065.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:1065 Template-Type: ReDIF-Paper 1.0 Title: Allocation Rules of Indivisible Prizes in Team Contests Author-Name: Hideo Konishi Author-X-Name-First: Hideo Author-X-Name-Last: Konishi Author-Person: pko35 Author-Email: konishih@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Nicolas Sahuguet Author-X-Name-First: Nicolas Author-X-Name-Last: Sahuguet Author-Workplace-Name: HEC Montreal Author-Email: nicolas.sahuguet@hec.ca Author-Name: Benoit Crutzen Author-X-Name-First: Benoit Author-X-Name-Last: Crutzen Author-Workplace-Name: Erasmus School of Economics Series: Boston College Working Papers in Economics Number: 1064 Abstract: We analyze contests in which teams compete to win indivisible homogeneous prizes. Teams are composed of members who may differ in their ability, and who exert effort to increase the success of their team. Each team member can obtain at most one prize as a reward. As effort is costly, teams use the allocation of prizes to give incentives and solve the free-riding problem. We develop a two-stage game. First, teams select a prize-allocation rule. Then, team members exert effort. Members take into account how their effort and the allocation rule influence the chance they receive a prize. We prove the existence and uniqueness of equilibrium. We characterize the optimal prize-assignment rule and individual and aggregate efforts. We then show that the optimal assignment rule is generally not monotonic. Classification-JEL: C72, D72 Keywords: contest, team, moral hazard Creation-Date: 20231202 File-URL: http://fmwww.bc.edu/EC-P/wp1064.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:1064 Template-Type: ReDIF-Paper 1.0 Title: Free Trade Agreements with Environmental Provisions Between Asymmetric Countries: Transfer of Clean Technology and Enforcement Author-Name: Hideo Konishi Author-X-Name-First: Hideo Author-X-Name-Last: Konishi Author-Person: pko35 Author-Email: konishih@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Minoru Nakada Author-X-Name-First: Minoru Author-X-Name-Last: Nakada Author-Workplace-Name: Nagoya University Author-Email: mnakada@cc.nagoya-u.ac.jp Author-Name: Akihisa Shibata Author-X-Name-First: Akihisa Author-X-Name-Last: Shibata Author-Workplace-Name: Kyoto University Series: Boston College Working Papers in Economics Number: 1063 Abstract: This paper investigates the e§ects of a free trade agreement (FTA) with environmental provisions between northern and southern countries. We explicitly consider clean technology transfers from the North to the South and the enforcement levels of adopting clean technology in the South, which have not been discussed so far. Southern producers beneÖt greatly from having unimpeded access to a northern market, but they are reluctant to use new high-cost, clean technology provided by the North. We investigate how environmentally conscious northern countries could design an FTA in which southern countries are provided with sufficient membership benefits but follow tighter enforcement requirements. We provide a quantitative evaluation of FTA policies using a numerical example. Classification-JEL: F15, F18, Q56 Keywords: Free trade agreements; Deep integration; Technology transfer; Monetary transfer; Environmental provisions; Enforcement Creation-Date: 20231202 File-URL: http://fmwww.bc.edu/EC-P/wp1063.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:1063 Template-Type: ReDIF-Paper 1.0 Title: Nonemptiness of the f-Core Without Comprehensiveness Author-Name: Hideo Konishi Author-X-Name-First: Hideo Author-X-Name-Last: Konishi Author-Person: pko35 Author-Email: konishih@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Dimitar Simeonov Author-X-Name-First: Dimitar Author-X-Name-Last: Simeonov Author-Workplace-Name: Bahçeşehir University Author-Email: dimitarasenov.simeonov@bau.edu.tr Series: Boston College Working Papers in Economics Number: 1062 Abstract: Kaneko and Wooders (1986) showed under general conditions that an atomless NTU game with finite types of players has a core allocation when coalitions have a finite number of players. In this paper, we provide a direct proof of the above result using Kakutani’s fixed point theorem when the sizes of coalitions are not only finite but also bounded above. This condition simplifies the presentation of the model and the existence proof. Most importantly, we can drop the comprehensiveness assumption, allowing for a much wider applicability of the result for matching problems, as well as for hedonic coalition formation problems. Additionally, without comprehensiveness, f-core allocations might not possess equal-treatment in payoffs for the same type. We also note that the nonemptiness of the core of NTU games by Scarf (1971) can be derived from our result as a corollary. Classification-JEL: C71, C78 Keywords: f-core, comprehensiveness, atomless players Creation-Date: 20231202 File-URL: http://fmwww.bc.edu/EC-P/wp1062.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:1062 Template-Type: ReDIF-Paper 1.0 Title: Formation of Teams in Contests: Tradeoffs Between Inter and Intra-Team Inequalities Author-Name: Hideo Konishi Author-X-Name-First: Hideo Author-X-Name-Last: Konishi Author-Person: pko35 Author-Email: konishih@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Chen-Yu Pan Author-X-Name-First: Chen-Yu Author-X-Name-Last: Pan Author-Workplace-Name: National Chengchi University, Taiwan Author-Email: panch@nccu.edu.tw Author-Name: Dimitar Simeonov Author-X-Name-First: Dimitar Author-X-Name-Last: Simeonov Author-Workplace-Name: Bahçeşehir University Author-Email: dimitarasenov.simeonov@bau.edu.tr Series: Boston College Working Papers in Economics Number: 1061 Abstract: We consider a team contest in which players make efforts to compete with other teams for a prize, and players of the winning team divide the prize according to a prize-sharing rule. This prize-sharing rule matters in generating members’ efforts and attracting players from outside. Assuming that players differ in their abilities to contribute to a team and their abilities are observable, we analyze which team structure is realized by allowing players to move across teams. This inter-team mobility is achieved via head-hunting: a team leader can offer one of the positions to an outside player. We say that it is a successful head-hunting if the player is better off by taking the position, and the team’s winning probability is improved. A team structure is stable if there is no successful head-hunting opportunity. We show that if all teams employ the egalitarian sharing rule, then the complete sorting of players according to their abilities occurs, and inter-team inequality becomes the largest. In contrast, if all teams employ a substantially unequal sharing rule, there is a stable team structure with a small inter-team inequality and a large intra-team inequality. This result illustrates a trade-off between intra-team inequality and inter-team inequality in forming teams. Classification-JEL: C71, C72, C78, D71, D72, D74 Keywords: group contest, pairwise stable matching, assortative matching, farsightedness, largest consistent set, effectiveness function Creation-Date: 20231118 File-URL: http://fmwww.bc.edu/EC-P/wp1061.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:1061 Template-Type: ReDIF-Paper 1.0 Title: Extreme temperatures: Gender differences in well-being Author-Name: Ignacio Belloc Author-X-Name-First: Ignacio Ignacio Author-X-Name-Last: Belloc Author-Workplace-Name: University of Zaragoza Author-Email: ibelloc@unizar.es Author-Person: pbe1326 Author-Name: J. Ignacio Giménez-Nadal Author-X-Name-First: Ignacio Author-X-Name-Last: Giménez-Nadal Author-Workplace-Name: University of Zaragoza Author-Email: ngimenez@unizar.es Author-Person: pgi103 Author-Name: José Alberto Molina Author-X-Name-First: José Author-X-Name-Last: Molina Author-Email: jamolina@unizar.es Author-WorkPlace-Name: Departamento de Análisis Económico, Universidad de Zaragoza Author-Person: pmo697 Abstract: Climate change and global warming have significant implications for people worldwide, necessitating an understanding of how extreme weather conditions affect individuals. This study investigates the relationship between individual affective well-being and extreme temperatures, using data from the American Time Use Survey's Well-Being Module for multiple years. The analysis focuses on daily variations in weather conditions at the county level in the United States. Findings reveal gender-specific outcomes, with males being more susceptible to extreme temperatures. On days with maximum temperatures exceeding 80oF, males experience higher levels of fatigue and stress, as well as reduced happiness and meaningfulness, compared to days with temperatures around 70oF. The study suggests that the negative impact on males' sleep quality may contribute to these gender disparities. Additionally, warmer states have witnessed a decline in the male population over the past four decades. These results offer valuable insights into the gender-specific, affective well-being consequences of climate change, emphasizing the need for gender-sensitive approaches in designing comprehensive strategies for climate mitigation and adaptation. Keywords: gender, weather conditions, extreme temperatures, well-being, time use, United States Classification-JEL: I31, J16, Q54 Series: Boston College Working Papers in Economics Number: 1060 Creation-Date: 20230827 File-URL: http://fmwww.bc.edu/EC-P/wp1060.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:1060 Template-Type: ReDIF-Paper 1.0 Title: Limited Monotonicity and the Combined Compliers LATE Author-Name: Nadja van ’t Hoff Author-X-Name-First: Nadja Author-X-Name-Last: Hoff Author-WorkPlace-Name: University of Southern Denmark Author-Name: Arthur Lewbel Author-X-Name-First: Arthur Author-X-Name-Last: Lewbel Author-Person: ple43 Author-Email: lewbel@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Giovanni Mellace Author-X-Name-First: Giovanni Author-X-Name-Last: Mellace Author-WorkPlace-Name: University of Southern Denmark Author-Email: giome@sam.sdu.dk Author-Person: pme404 Abstract: We consider estimating a local average treatment effect given an endogenous binary treatment and two or more valid binary instruments. We propose a novel limited monotonicity assumption that is generally weaker than alternative monotonicity assumptions considered in the literature, and allows for a great deal of choice heterogeneity. Using this limited monotonicity, we define and identify the Combined Complier Local Average Treatment Effect (CC-LATE), which is arguably a more policy relevant parameter than the weighted average of LATEs identified by Two Stage Least Squares. We apply our results to estimate the effect of learning one’s HIV status on protective behaviors. Keywords: Instrumental variable, Local Average Treatment Effect, monotonicity, multiple instruments Classification-JEL: C14, C21, C26 Series: Boston College Working Papers in Economics Number: 1059 Creation-Date: 20230524 Revision-Date: 20240425 File-URL: http://fmwww.bc.edu/EC-P/wp1059.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:1059 Template-Type: ReDIF-Paper 1.0 Title: Estimating Nonlinear Network Data Models with Fixed Effects Author-Name: David W. Hughes Author-X-Name-First: David Author-X-Name-Last: Hughes Author-Email: dw.hughes@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Person: phu664 Abstract: This paper considers estimation of a directed network model in which outcomes are driven by dyad-specific variables (such as measures of homophily) as well as unobserved agent-specific parameters that capture degree heterogeneity. I develop a jackknife bias correction to deal with the incidental parameters problem that arises from fixed effect estimation of the model. In contrast to previous proposals, the jackknife approach is easily adaptable to different models and allows for non-binary outcome variables. Additionally, since the jackknife estimates all parameters in the model, including fixed effects, it allows researchers to construct estimates of average effects and counterfactual outcomes. I also show how the jackknife can be used to bias-correct fixed effect averages over functions that depend on multiple nodes, e.g. triads or tetrads in the network. As an example, I implement specification tests for dependence across dyads, such as reciprocity or transitivity. Finally, I demonstrate the usefulness of the estimator in an application to a gravity model for import/export relationships across countries. Keywords: network data, fixed effects, incidental parameters problem, jackknife Classification-JEL: C31. C35 Series: Boston College Working Papers in Economics Number: 1058 Creation-Date: 20211108 File-URL: http://fmwww.bc.edu/EC-P/wp1058.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:1058 Template-Type: ReDIF-Paper 1.0 Title: Large Compound Lotteries Author-Name: Zvi Safra Author-Workplace-Name: Warwick Business School Author-Email: zvi.safra@wbs.ac.uk Author-Name: Uzi Segal Author-X-Name-First: Uzi Author-X-Name-Last: Segal Author-Person: pse40 Author-Email: uzi.segal@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Series: Boston College Working Papers in Economics Number: 1057 Abstract: Extending preferences over simple lotteries to compound (two-stage) lotteries can be done using two different methods: (1) using the Re- duction of compound lotteries axiom, under which probabilities of the two stages are multiplied; (2) using the compound independence ax- iom, under which each second-stage lottery is replaced by its certainty equivalent. Except for expected utility preferences, the rankings in- duced by the two methods are always in disagreement and deciding on which method to use is not straightforward. Moreover, sometimes each of the two methods may seem to violate some kind of first order stochastic dominance. In this paper we demonstrate that, under some conditions, the disagreement disappears in the limit and that for (al- most) any pair of compound lotteries, the two methods agree if the lotteries are replicated sufficiently many times. Creation-Date: 20210428 Revision-Date: 20230801 Classification-JEL: D81 Keywords: Reduction of compound lotteries axiom, compound independence axiom, duplicated lotteries File-URL: http://fmwww.bc.edu/EC-P/wp1057.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:1057 Template-Type: ReDIF-Paper 1.0 Title: Estimating Social Network Models with Missing Links Author-Name: Arthur Lewbel Author-X-Name-First: Arthur Author-X-Name-Last: Lewbel Author-Person: ple43 Author-Email: lewbel@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Xi Qu Author-X-Name-First: Xi Author-X-Name-Last: Qu Author-WorkPlace-Name: Shanghai Jiao Tong University Author-Name: Xun Tang Author-X-Name-First: Xun Author-X-Name-Last: Tang Author-WorkPlace-Name: Rice University Author-Person: pta642 Abstract: We propose an adjusted 2SLS estimator for social network models when some existing network links are missing from the sample (due, e.g., to recall errors by survey respondents, or lapses in data input). In the feasible structural form, missing links make all covariates endogenous and add a new source of correlation between the structural errors and endogenous peer outcomes (in addition to simultaneity), thus invalidating conventional estimators used in the literature. We resolve these issues by rescaling peer outcomes with estimates of missing rates and constructing instruments that exploit properties of the noisy network measures. We apply our method to study peer effects in household decisions to participate in a microfinance program in Indian villages. We find that ignoring missing links and applying conventional instruments would result in a sizeable upward bias in peer effect estimates. Keywords: social networks, 2SLS, missing links Classification-JEL: C31, G21, L14, C51 Series: Boston College Working Papers in Economics Number: 1056 Creation-Date: 20221220 File-URL: http://fmwww.bc.edu/EC-P/wp1056.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:1056 Template-Type: ReDIF-Paper 1.0 Title: Commitment and the Dynamics of Household Labor Supply Author-Name: Alexandros Theloudis Author-X-Name-First: Alexandros Author-X-Name-Last: Theloudis Author-Workplace-Name: Tilburg University Author-Email: a.theloudis@gmail.com Author-Person: pth301 Author-Name: Jorge Velilla Author-X-Name-First: Jorge Author-X-Name-Last: Velilla Author-Workplace-Name: University of Zaragoza Author-Email: jvelilla@unizar.es Author-Person: pve359 Author-Name: Pierre-André Chiappori Author-X-Name-First: Pierre-André Author-X-Name-Last: Chiappori Author-Workplace-Name: Columbia University Author-Email: pc2167@columbia.edu Author-Person: pch377 Author-Name: J. Ignacio Giménez-Nadal Author-X-Name-First: Ignacio Author-X-Name-Last: Giménez-Nadal Author-Workplace-Name: University of Zaragoza Author-Email: ngimenez@unizar.es Author-Person: pgi103 Author-Name: José Alberto Molina Author-X-Name-First: José Author-X-Name-Last: Molina Author-Email: jamolina@unizar.es Author-WorkPlace-Name: Departamento de Análisis Económico, Universidad de Zaragoza Author-Person: pmo697 Abstract: The extent to which individuals commit to their partner for life has important implications. This paper develops a lifecycle collective model of the household, through which it characterizes behavior in three prominent alternative types of commitment: full, limited, and no commitment. We propose a test that distinguishes between all three types based on how contemporaneous and historical news affect household behavior. Our test permits heterogeneity in the degree of commitment across households. Using recent data from the Panel Study of Income Dynamics, we reject full and no commitment, while we find strong evidence for limited commitment. Keywords: Household behavior; Intertemporal choice; Commitment; Collective model; Family labor supply; Dynamics; Wages; PSID Classification-JEL: D12; D13; D15; J22; J31 Series: Boston College Working Papers in Economics Number: 1055 Creation-Date: 20221118 File-URL: http://fmwww.bc.edu/EC-P/wp1055.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:1055 Template-Type: ReDIF-Paper 1.0 Title: How (not) to reform India's affirmative action policies for its economically weaker segments Author-Name: Tayfun Sönmez Author-X-Name-First: Tayfun Author-X-Name-Last: Sönmez Author-Email: sonmezt@bc.edu Author-Person: psi57 Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: M. Utku Ünver Author-X-Name-First: M. Author-X-Name-Last: Ünver Author-Person: pun2 Author-Email: unver@bc.edu Author-Workplace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: Various groups in India are protected with a vertical reservation (VR) policy, which sets aside a fraction of government positions and public school seats for each pro- tected group. By law, VR-protected positions are processed after those open to all appli- cants, thus assuring that they are awarded to individuals who cannot receive open po- sitions with merit. Historically, VR protections were exclusive to groups who suffered marginalization and discrimination due to their hereditary caste identities. This structure means that no individual can belong to multiple VR-protected groups, which in turn im- plies that the processing sequence of VR-protected groups is immaterial. A Constitutional Amendment in 2019 granted economically weaker sections (EWS) with VR protections, but limited its eligibility to members of forward castes who are ineligible for caste-based VR protections. The amendment was immediately brought to court, and the exclusion of mem- bers of caste-based VR-protected groups was challenged due to its violation of individual Right to Equality. In September 2022, a compromise that is discussed at the Supreme Court involves maintaining the amendment, but expanding its scope to include the excluded groups. If this compromise is adopted in the country, individuals can belong to multiple VR-protected groups. We show that a major loophole in the system will emerge, if the Supreme Court merely expands the scope of EWS without specifying how its positions are to be processed in relation to earlier caste-based VR-protected positions. Depending on which normative objective the court wants to promote, we formulate and characterize three plausible specifications. If EWS is processed simultaneously with other VR-protected groups, then the outcome is one that selects the most meritorious individuals subject to the Supreme Court’s mandates. If EWS is processed before all other VR-protected groups, then the outcome is one that maintains the elevated status of caste-based VR protections. If EWS is processed after all other VR-protected groups, then the outcome is the smallest possible change from the contested amendment that escapes a violation of individual Right to Equality. Keywords: Market design, matching, affirmative action, reserve system, EWS quota Series: Boston College Working Papers in Economics Number: 1054 Creation-Date: 20221102 Classification-JEL: C78, D47 File-URL: http://fmwww.bc.edu/EC-P/wp1054.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:1054 Template-Type: ReDIF-Paper 1.0 Title: Novel Shift-Share Instruments and Their Applications Author-Name: Benjamin Ferri Author-X-Name-First: Benjamin Author-X-Name-Last: Ferri Author-Email: benjferri@gmail.com Author-Person: pfe605 Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: Shift-Share (Bartik) instruments are among the most important tools for causal identification in economics. In this paper, I crystallize main ideas underlying Shift-Share instruments - their core structure, distinctive claim to validity as instruments, history, uses, and wealth of varieties. I argue that the essence of the Shift-Share approach is to decompose the endogenous explanatory variable into an accounting identity with multiple component parts; preserve that which is most exogenous in the accounting identity, and neutralize that which is most endogenous. Following this framework, I show clearly how several variants in the literature are related. I then develop formulas for several new variants. Particularly, I show how to develop Shift-Share instruments for distribution summaries beyond the mean - the variance, skew, absolute deviation around a central point, and Gini coefficient. As an empirical application that highlights the themes of the paper, I measure the effect of earnings inequality on rates of single parenting in the U.S., comparing results using each of various alternative instruments for the Gini coefficient. Keywords: shift-share, bartik, instrumental variables, panel data, labor demand and supply, earnings inequality, single parenting Classification-JEL: C23, C26, D31, J20, R12, R23 Series: Boston College Working Papers in Economics Number: 1053 Creation-Date: 20220927 File-URL: http://fmwww.bc.edu/EC-P/wp1053.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:1053 Template-Type: ReDIF-Paper 1.0 Title: Dual-Earner Migration Decisions, Earnings, and Unemployment Insurance Author-Name: Joanna Venator Author-X-Name-First: Joanna Author-X-Name-Last: Venator Author-Email: venator@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Person: pve479 Abstract: Dual-earner couples’ decisions of where to live and work often result in one spouse – the trailing spouse – experiencing earnings losses at the time of a move. This paper examines how married couples’ migration decisions differentially impact men’s and women’s earnings and the role that policy can play in improving post-move outcomes for trailing spouses. I use panel data from the NLSY97 and a generalized difference- in-differences design to show that access to unemployment insurance (UI) for trailing spouses increases long-distance migration rates by 1.9–2.3 percentage points (38–46%) for married couples. I find that women are the primary beneficiaries of this policy, with higher UI uptake following a move and higher annual earnings of $4,500–$12,000 three years post-move. I then build and estimate a structural model of dual-earner couples’ migration decisions to evaluate the effects of a series of counterfactual policies. I show that increasing the likelihood of joint distant offers substantively increases migration rates, increases women’s post-move employment rates, and improves both men and women’s earnings growth at the time of a move. However, unconditional subsidies for migration that are not linked to having an offer in hand at the time of the move reduce post-move earnings for both men and women, with stronger effects for women. Keywords: unemployment insurance, migration, economic geography, household behavior and family economics Classification-JEL: D1, J1, J16, J61, J65, R5 Series: Boston College Working Papers in Economics Number: 1052 Creation-Date: 20220914 File-URL: http://fmwww.bc.edu/EC-P/wp1052.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:1052 Template-Type: ReDIF-Paper 1.0 Title: To Grandmother’s House We Go: Childcare Time Transfers and Female Labor Mobility Author-Name: Garrett Anstreicher Author-X-Name-First: Garrett Author-X-Name-Last: Anstreicher Author-Workplace-Name: University of Wisconsin-Madison Author-Name: Joanna Venator Author-X-Name-First: Joanna Author-X-Name-Last: Venator Author-Email: venator@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Person: pve479 Abstract: Women in the United States frequently rely on childcare from extended family but can only do so if they live in the same location as them. This paper studies how child care costs, the location of extended family, and fertility events influence both the labor force attachment and labor mobility of women in the United States. We begin by empirically documenting strong patterns of women returning to their home locations in anticipation of fertility events, indicating that the desire for intergenerational time transfers is an important motivator of home migration. Moreover, women who reside in their parent’s location experience a substantial long-run reduction in their child earnings penalty. Next, we build a dynamic model of labor force participation and migration to assess the incidence of counterfactual scenarios and childcare policies. We find that childcare subsidies increase lifetime earnings and labor mobility for women, with particularly strong effects for women who are ever single mothers and Blacks. Ignoring migration can understate the welfare benefits of these policies by a meaningful extent. Keywords: Migration, childcare, female labor supply, human capital Classification-JEL: J13, J22, J61 Series: Boston College Working Papers in Economics Number: 1051 Creation-Date: 20220916 File-URL: http://fmwww.bc.edu/EC-P/wp1051.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:1051 Template-Type: ReDIF-Paper 1.0 Title: Market Design for Distributional Objectives in (Re)assignment: An Application to Improve the Distribution of Teachers in Schools Author-Name: Julien Combe Author-X-Name-First: Julien Author-X-Name-Last: Combe Author-Workplace-Name: École Polytechnique Author-Email: julien.combe@polytechnique.edu Author-Name: Umut Mert Dur Author-X-Name-First: Umut Author-X-Name-Last: Dur Author-Person: pdu318 Author-Email: umutdur@gmail.com Author-WorkPlace-Name: North Carolina State University Author-Email: Author-Name: Olivier Tercieux Author-X-Name-First: Olivier Author-X-Name-Last: Tercieux Author-Person: pte149 Author-Workplace-Name: Paris School of Economics Author-Email: tercieux@pse.ens.fr Author-Name: Camille Terrier Author-X-Name-First: Camille Author-X-Name-Last: Terrier Author-Workplace-Name: University of Lausanne Author-Email: camille.terrier@unil.ch Author-Name: M. Utku Ünver Author-X-Name-First: M. Author-X-Name-Last: Ünver Author-Person: pun2 Author-Email: unver@bc.edu Author-Workplace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: Centralized (re)assignment of workers to jobs is increasingly common in public and private sectors. These markets often suffer from distributional problems. To alleviate these, we propose two new strategy-proof (re)assignment mechanisms. While they both improve individual and distributional welfare over the status quo, one achieves two-sided efficiency and the other achieves a novel fairness property. We quantify the performance of these mechanisms in teacher (re)assignment where unequal distribution of experienced teachers in schools is a widespread concern. Using French data, we show that our efficient mechanism reduces the teacher experience gap across regions more effectively than benchmarks, including the current mechanism, while also effectively increasing teacher welfare. As an interesting finding, while our fairness-based mechanism is very effective in reducing teacher experience gap, it prevents the mobility of tenured teachers, which is a detrimental teacher welfare indicator. Keywords: Matching Theory, Market Design, Priority Design, Teacher Reassignment, Status- quo Improvement, Fairness, Efficiency, Distributional Welfare Measures Series: Boston College Working Papers in Economics Number: 1050 Creation-Date: 20220215 Classification-JEL: C78, D50, D61, D67, I21 File-URL: http://fmwww.bc.edu/EC-P/wp1050.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:1050 Template-Type: ReDIF-Paper 1.0 Title: Firms in (Green) Public Procurement: Financial strength indicators’ impact on contract awards and its repercussion on financial strength Author-Name: Christopher F Baum Author-X-Name-First: Christopher Author-X-Name-Last: Baum Author-Person: pba1 Author-Email: baum@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Workplace-Name: DIW Berlin Author-Name: Arash Kordestani Author-X-Name-First: Arash Author-X-Name-Last: Kordestani Author-WorkPlace-Name: Södertörn University Author-Email: arash.kordestani@sh.se Author-Name: Dorothea Schäfer Author-X-Name-First: Dorothea Author-X-Name-Last: Schäfer Author-Person: psc175 Author-Workplace-Name: DIW Berlin Author-WorkPlace-Name: Jönköping International Business School Author-Email: dschaefer@diw.de Author-Name: Andreas Stephan Author-X-Name-First: Andreas Author-X-Name-Last: Stephan Author-Workplace-Name: Linnaeus University Author-Workplace-Name: DIW Berlin Author-Email: andreas.stephan@lnu.se Author-Person: pst185 Abstract: We examine whether the financial strength of companies, in particular, small and medium-sized enterprises (SMEs) is causally linked to the award of a public procurement contract (PP), especially in the environmentally friendly “green” area (GPP). For this purpose, we build a combined procurement company data set from the Tenders Electronic Daily (TED) and the SME database AMADEUS, which includes ten European countries. First, we apply probit models to investigate whether the probability of winning the public tender depends on the company's financial strength. We then use the flexpanel DiD approach to investigate the question of whether the award has an impact on the future financial strength of the successful company. On the one hand, we find that a lower equity ratio and a higher short-term debt ratio increase the probability of being successful in a public tender. On the other hand, the success means that the companies can continue to work after the award with a lower equity ratio than comparable companies without an award, regardless of whether the company was successful in a traditional or a “green” public tender. We conclude from this that the success in a PP is a substitute for one's own financial strength and thus facilitates access to external financing. The estimation results differ depending on whether public procurement in general or the sub-group of sustainable public procurement is examined. Keywords: public procurement, green investment, public authorities, European Union Classification-JEL: H42, H44, C54 Series: Boston College Working Papers in Economics Number: 1049 Creation-Date: 20220124 File-URL: http://fmwww.bc.edu/EC-P/wp1049.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:1049 Template-Type: ReDIF-Paper 1.0 Title: Estimating A Model of Inefficient Cooperation and Consumption in Collective Households Author-Name: Arthur Lewbel Author-X-Name-First: Arthur Author-X-Name-Last: Lewbel Author-Person: ple43 Author-Email: lewbel@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Krishna Pendakur Author-X-Name-First: Krishna Author-X-Name-Last: Pendakur Author-WorkPlace-Name: Simon Fraser University Author-Person: ppe241 Abstract: Lewbel and Pendakur (2021) propose a model of consumption inefficiency in collective households, based on "cooperation factors". We simplify that model to make it empirically tractable, and apply it to identify and estimate household member resource shares, and to measure the dollar cost of inefficient levels of cooperation. Using data from Bangladesh, we find that increased cooperation among household members yields the equivalent of a 13% gain in total expenditures, with most of the benefit of this gain going towards men. Keywords: Collective Household Model, Inefficiency, Bargaining Power, Sharing Rule, Demand Systems Classification-JEL: D13, D11, D12, C31, I32 Series: Boston College Working Papers in Economics Number: 1048 Creation-Date: 20210115 Revision-Date: 20220715 File-URL: http://fmwww.bc.edu/EC-P/wp1048.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:1048 Template-Type: ReDIF-Paper 1.0 Title: Durable Goods and Consumer Behavior with Liquidity Constraints: Evidence from Norway Author-Name: H. Youn Kim Author-X-Name-First: Youn Author-X-Name-Last: Kim Author-Workplace-Name: Western Kentucky University Author-Email: youn.kim@wku.edu Author-Name: José Alberto Molina Author-X-Name-First: José Author-X-Name-Last: Molina Author-Email: jamolina@unizar.es Author-WorkPlace-Name: Departamento de Análisis Económico, Universidad de Zaragoza Author-Person: pmo697 Author-Name: Ka Kei Gary Wong Author-X-Name-First: Gary Author-X-Name-Last: Wong Author-Workplace-Name: University of Macau Author-Email: garywong@umac.mo Author-Person: pwo309 Abstract: This paper jointly analyzes consumer demand and consumption with allowance for durable goods and liquidity constraints. An indirect utility function is specified with the user cost of durable goods, and demand functions for nondurable and durable goods and a consumption growth equation are derived by incorporating liquidity constraints. The model is estimated for Norwegian consumers for 1979-2018, and results reveals that traditional demand analyses ignoring durable goods leads to a significant bias in the elasticities of nondurable goods. Durable goods are found to be necessities and price-inelastic like most nondurable goods. Norwegian consumers are, in general, impatient with low risk aversion. There is weak evidence for liquidity constraints, which have no important influence on consumption. No strong evidence exists for intertemporal substitution in consumption of nondurable and durable goods. However, there is a considerable effect of uncertainty on consumption, especially for durable goods, which can explain consumption/saving behavior during the current Covid pandemic. Keywords: Indirect utility function, User cost of durable goods, Euler equation, Risk aversion, Intertemporal substitution Classification-JEL: E21, D15, D12 Series: Boston College Working Papers in Economics Number: 1047 Creation-Date: 20220118 File-URL: http://fmwww.bc.edu/EC-P/wp1047.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:1047 Template-Type: ReDIF-Paper 1.0 Title: Distance to Schools and Equal Access in School Choice Systems Author-Name: Mariana Laverde Author-X-Name-First: Mariana Author-X-Name-Last: Laverde Author-Email: mariana.laverde@bc.edu Author-Person: pla1048 Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: This paper studies the limits of school choice policies in the presence of residential segregation. Using data from the Boston Public Schools choice system, I show that white prekindergarteners are assigned to higher-achieving schools than minority students, and that cross-race school achievement gaps under choice are no lower than would be generated by a neighborhood assignment rule. To understand why choice-based assignments do not reduce gaps in school achievement, I use data on applicants’ rank-order choices to estimate preferences over schools, and consider a series of counterfactual assignments. I find that half of the gap in school achievement between white and Black or Hispanic students is explained by minorities’ longer travel distance to high-performing schools. Differences in demand parameters explain a smaller fraction of the gap, while algorithm rules have no effect. Classification-JEL: I21, I24, D47 Keywords: school choice, discrimination, segregation Series: Boston College Working Papers in Economics Number: 1046 Creation-Date: 20220103 File-URL: http://fmwww.bc.edu/EC-P/wp1046.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:1046 Template-Type: ReDIF-Paper 1.0 Title: Censored QUAIDS estimation with quaidsce Author-Name: Juan Carlos Caro Author-X-Name-First: Juan Author-X-Name-Last: Caro Author-Workplace-Name: University of Luxembourg Author-Name: Grace Melo Author-X-Name-First: Grace Author-X-Name-Last: Melo Author-Workplace-Name: Texas A&M University Author-Person: pme787 Author-Name: José Alberto Molina Author-X-Name-First: José Author-X-Name-Last: Molina Author-Email: jamolina@unizar.es Author-WorkPlace-Name: Departamento de Análisis Económico, Universidad de Zaragoza Author-Person: pmo697 Author-Name: Juan Carlos Salgado Author-X-Name-First: Juan Author-X-Name-Last: Salgado Author-Workplace-Name: Instituto Nacional de Salúd Pública, México Abstract: Censoring, or zero expenditures, in the dependent variables of demand systems can lead to inconsistent parameter and elasticity estimates. Poi (2012) introduced the Stata command quaids to estimate quadratic almost-ideal demand systems, or QUAIDS (Banks, Bundell and Lewbel, 1997), although without the possibility to address censoring. In this paper, we introduce the command quaidsce to consistently estimate the QUAIDS in the presence of zero observations, using the two-step procedure proposed by Shonkwiler and Yen (1999). The new command also allows for estimating expenditure and price elasticities with standard errors, using post-estimation tools. Keywords: Censoring, Stata, QUAIDS, quaidsce Classification-JEL: D12, C30, C87 Series: Boston College Working Papers in Economics Number: 1045 Creation-Date: 20211212 File-URL: http://fmwww.bc.edu/EC-P/wp1045.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:1045 Template-Type: ReDIF-Paper 1.0 Title: Arrovian Efficiency and Auditability in Discrete Mechanism Design Author-Name: Marek Pycia Author-X-Name-First: Marek Author-X-Name-Last: Pycia Author-Email: marek.pycia@econ.uzh.ch Author-WorkPlace-Name: University of Zurich Author-Person: ppy24 Author-Name: M. Utku Ünver Author-X-Name-First: M. Author-X-Name-Last: Ünver Author-Person: pun2 Author-Workplace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: We study mechanism design and preference aggregation in environments in which the space of social alternatives is discrete and the preference domain is rich, as in standard models of social choice and so-called allocation without transfers. We show that a mechanism (or aggregation rule) selects the best outcome with respect to some resolute Arrovian social welfare function if, and only if, it is Pareto efficient and auditable. We further show that auditability implies non-bossiness and is implied by the conjunction of non-bossiness and individual strategy-proofness, and that the later conjunction is equivalent to group strategy-proofness as well as to Maskin monotonicity. As applications, we derive new characterizations in voting and allocation domains. Series: Boston College Working Papers in Economics Number: 1044 Creation-Date: 20211115 Keywords: Strategy-proofness, Pareto efficiency, Arrovian preference aggregation, auditability, non-bossiness, voting, house allocation Classification-JEL: C78, D78 File-URL: http://fmwww.bc.edu/EC-P/wp1044.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:1044 Template-Type: ReDIF-Paper 1.0 Title: Untying the Knot: How Child Support and Alimony Affect Couples’ Decisions and Welfare Author-Name: Hanno Foerster Author-X-Name-First: Hanno Author-X-Name-Last: Foerster Author-Email: hanno.foerster@bc.edu Author-Person: pfo326 Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: In many countries divorce law mandates post-marital maintenance payments (child support and alimony) to insure the lower earner in married couples against financial losses upon divorce. This paper studies how maintenance payments affect couples’ intertemporal decisions and welfare. I develop a dynamic model of family labor supply, housework, savings and divorce and estimate it using Danish register and survey data. The model captures the policy trade off between providing insurance to the lower earner and enabling couples to specialize efficiently, on the one hand, and maintaining labor supply incentives for divorcees, on the other hand. I use the estimated model to study various counterfactual policy scenarios. I find that alimony payments come with strong labor supply disincentives and as a consequence fail to provide consumption insurance. The welfare maximizing policy involves increasing the lump sum component of child support, increasing the dependence of child support on the payer’s income and reducing alimony payments relative to the Danish status quo. Switching to the welfare maximizing policy makes women better and men worse off, but comparisons to first best allocations show that Pareto improvements are feasible, highlighting a limitation of child support and alimony policies. Classification-JEL: D10, D91, J18, J12, J22, K36 Keywords: marriage and divorce, child support, alimony, household behavior, labor supply, limited commitment Series: Boston College Working Papers in Economics Number: 1043 Creation-Date: 20200330 Revision-Date: 20231206 Publication-Status: forthcoming, Review of Economic Studies File-URL: http://fmwww.bc.edu/EC-P/wp1043.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:1043 Template-Type: ReDIF-Paper 1.0 Title: A Structural Analysis of Vacancy Referrals with Imperfect Monitoring and the Strategic Use of Sickness Absence Author-Name: Gerard J. van den Berg Author-X-Name-First: Gerard Author-X-Name-Last: van den Berg Author-WorkPlace-Name: University of Groningen Author-Person: pva310 Author-Name: Hanno Foerster Author-X-Name-First: Hanno Author-X-Name-Last: Foerster Author-Email: hanno.foerster@bc.edu Author-Person: pfo326 Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Arne Uhlendorff Author-X-Name-First: Arne Author-X-Name-Last: Uhlendorff Author-WorkPlace-Name: CNRS Author-Person: puh2 Author-Email: arne.uhlendorff@gmail.com Abstract: This paper provides a structural analysis of the role of job vacancy referrals (VRs) by Employment Agencies in the job search behavior of unemployed individuals, incorporating in- stitutional features of the monitoring of search behavior by the agencies. Notably, rejections of VRs may lead to sanctions (temporary benefits reductions) while workers may report sick to avoid those. We estimate models using German administrative data from social security records linked with caseworker recorded data on VRs, sick reporting and sanctions. The anal- ysis highlights the influence of aspects of the health care system on unemployment durations. We estimate that for around 25% of unemployed workers, removing the channel that enables strategic sick reporting reduces the mean unemployment duration by 8 days. Classification-JEL: J64, J65, C51, C54 Keywords: unemployment, wage, unemployment insurance, monitoring, moral hazard, struc- tural estimation, counterfactual policy evaluation, unemployment duration Series: Boston College Working Papers in Economics Number: 1042 Creation-Date: 20210817 Revision-Date: 20230917 File-URL: http://fmwww.bc.edu/EC-P/wp1042.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:1042 Template-Type: ReDIF-Paper 1.0 Title: Exchange Rate Disconnect Revisited Author-Name: Ryan Chahrour Author-X-Name-First: Ryan Author-X-Name-Last: Chahrour Author-Person: pch1111 Author-Email: ryan.chahrour@cornell.edu Author-WorkPlace-Name: Cornell University Author-Name: Vito Cormun Author-X-Name-First: Vito Author-X-Name-Last: Cormun Author-WorkPlace-Name: Santa Clara University Author-Email: vcormun@scu.edu Author-Person: pco1012 Author-Name: Pierre De Leo Author-X-Name-First: Pierre Author-X-Name-Last: De Leo Author-WorkPlace-Name: University of Maryland Author-Email: deleop@umd.edu Author-Person: pde1246 Author-Name: Pablo Guerron-Quintana Author-X-Name-First: Pablo Author-X-Name-Last: Guerron-Quintana Author-WorkPlace-Name: Boston College Author-Email: guerron@bc.edu Author-Person: pgu174 Author-Name: Rosen Valchev Author-X-Name-First: Rosen Author-X-Name-Last: Valchev Author-Person: pva831 Author-Email: rosen.valchev@bc.edu Author-WorkPlace-Name: Boston College Abstract: We find that variation in expected U.S. productivity explains over half of G6 exchange rate fluctuations vis-a-vis the USD. Both correctly-anticipated changes in productivity and expectational “noise,” which influences expectations of productivity but not the actual realization, have significant effects on exchange rates. Together, these two types of disturbances explain many unconditional exchange rate patterns, including predictable excess returns, low Backus-Smith correlations, and excess volatility. Our findings suggest these well-known puzzles have a common empirical origin, which is linked to (expected) productivity. We also discuss how noise in expectations has obscured the relationship between exchange rates and fundamentals in the empirical approaches undertaken in prior work. Classification-JEL: D8, F3, G1 Keywords: Exchange Rate Disconnect, TFP News, Excess Returns, Excess Volatility Series: Boston College Working Papers in Economics Number: 1041 Note: previously circulated as "Exchange Rate Disconnect Redux" Creation-Date: 20211105 Revision-Date: 20230512 File-URL: http://fmwww.bc.edu/EC-P/wp1041.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:1041 Template-Type: ReDIF-Paper 1.0 Title: Assortative Matching with Externalities and Farsighted Agents Author-Name: Kenzo Imamura Author-X-Name-First: Kenzo Author-X-Name-Last: Imamura Author-Workplace-Name: University of Tokyo Market Design Center Author-Email: imamurak@e.u-tokyo.ac.jp Author-Name: Hideo Konishi Author-X-Name-First: Hideo Author-X-Name-Last: Konishi Author-Person: pko35 Author-Email: konishih@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Series: Boston College Working Papers in Economics Number: 1040 Abstract: We consider a one-to-one assortative matching problem in which matched pairs compete for a prize. With such externalities, the standard solution concept, pairwise stable matching, may not exist. In this paper, we consider farsighted agents and analyze the largest consistent set (LCS) of Chwe (1994). Despite the assortative structure of the problem, LCS tend to be large with the standard effectiveness functions: LCS can be the set of all matchings, including an empty matching with no matched pair. By modifying the effectiveness function motivated by Knuth (1976), LCS becomes a singleton of the positive assortative matching. Our results suggest that the choice of effectiveness function can significantly impact the solution in a matching problem with externalities. Classification-JEL: C7, D71, D72 Keywords: group contest, pairwise stable matching, assortative matching, farsightedness, largest consistent set, effectiveness function Creation-Date: 20211104 File-URL: http://fmwww.bc.edu/EC-P/wp1040.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:1040 Template-Type: ReDIF-Paper 1.0 Title: Stability in Matching with Externalities: Pairs Competition and Oligopolistic Joint Ventures Author-Name: Kenzo Imamura Author-X-Name-First: Kenzo Author-X-Name-Last: Imamura Author-Workplace-Name: University of Tokyo Market Design Center Author-Email: imamurak@e.u-tokyo.ac.jp Author-Name: Hideo Konishi Author-X-Name-First: Hideo Author-X-Name-Last: Konishi Author-Person: pko35 Author-Email: konishih@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Chen-Yu Pan Author-X-Name-First: Chen-Yu Author-X-Name-Last: Pan Author-Workplace-Name: National Chengchi University, Taiwan Author-Email: panch@nccu.edu.tw Series: Boston College Working Papers in Economics Number: 1039 Abstract: This paper presents one-to-one matching and assignment problems with externalities across pairs such as pairs figure skating competition and joint ventures in oligopolistic markets. In these models, players care not only about their partners but also which and how many rival pairs are formed. Thus, it is important for a deviating pair to know which matching will realize after it deviates from a matching (an effectiveness function) in order to define pairwise stable matching. Using a natural effectiveness function for such environments, we show that the assortative matching is pairwise stable. We discuss two generalizations of our model including intrinsic preferences on partners and pair-specific match qualities to see how our stability concept performs in these generalized models. Classification-JEL: C7, D71, D72 Keywords: one-to-one matching, matching with externalities, pairwise stable matching, coalition formation, group contest, joint ventures, myopia, farsightedness. Creation-Date: 20211104 File-URL: http://fmwww.bc.edu/EC-P/wp1039.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:1039 Template-Type: ReDIF-Paper 1.0 Title: Blood Allocation with Replacement Donors: A Theory of Multi-unit Exchange with Compatibility-based Preferences Author-Name: Xiang Han Author-X-Name-First: Xiang Author-X-Name-Last: Han Author-Workplace-Name: Shanghai University of Finance and Economics Author-Email: han.xiang@sufe.edu.cn Author-Name: Onur Kesten Author-X-Name-First: Onur Author-X-Name-Last: Kesten Author-Workplace-Name: University of Sydney Author-Email: onur.kesten@sydney.edu.au Author-Name: M. Utku Ünver Author-X-Name-First: M. Author-X-Name-Last: Ünver Author-Person: pun2 Author-Email: unver@bc.edu Author-Workplace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: In 56 developing and developed countries, blood component donations by volunteer non-remunerated donors can only meet less than 50% of the demand. In these countries, blood banks rely on replacement donor programs that provide blood to patients in return for donations made by their relatives or friends. These programs appear to be disorganized, non-transparent, and inefficient. We introduce the design of replacement donor programs and blood allocation schemes as a new application of market design. We introduce optimal blood allocation mechanisms that accommodate fairness, efficiency, and other allocation objectives, together with endogenous exchange rates between received and donated blood units beyond the classical one-for-one exchange. Additionally, the mechanisms provide correct incentives for the patients to bring forward as many replacement donors as possible. This framework and the mechanism class also apply to general applications of multi-unit exchange of indivisible goods with compatibility-based preferences beyond blood allocation with different information problems. Keywords: Blood transfusion, market design, multi-unit exchange, dichotomous preferences, endogenous pricing Series: Boston College Working Papers in Economics Number: 1038 Creation-Date: 20210615 Classification-JEL: D47, C78, I19, D82, D78 File-URL: http://fmwww.bc.edu/EC-P/wp1038.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:1038 Template-Type: ReDIF-Paper 1.0 Title: How does Student Debt affect Early-Career Retirement Saving? Author-Name: Matthew S. Rutledge Author-X-Name-First: Matthew Author-X-Name-Last: Rutledge Author-Email: matthew.rutledge@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Name: Center for Retirement Research at Boston College Author-Person: pru326 Author-Name: Geoffrey Sanzenbacher Author-X-Name-First: Geoffrey Author-X-Name-Last: Sanzenbacher Author-WorkPlace-Name: Boston College Author-Person: psa1308 Author-Name: Francis M. Vitagliano Author-X-Name-First: Francis Author-X-Name-Last: Vitagliano Author-WorkPlace-Name: Center for Retirement Research at Boston College Abstract: This paper examines the relationship between student loans and retirement saving by 30-year-old workers. Total outstanding student loan debt in the United States has quintupled since 2004. Rising student debt levels mean that young workers must reduce either their consumption or their saving. To what extent do these workers cut back on retirement saving? Existing studies have lacked adequate data or controls for studying this issue, especially for younger workers. This study uses the National Longitudinal Survey of Youth 1997 Cohort, and thus includes a large sample of young workers, and includes detailed controls including school quality, parental background, and the underlying ability of the college attendee. While the estimated relationship between student debt and participation in a retirement plan is small, bachelor’s degree-holders who have student loans do have significantly lower retirement assets at age 30 than those without loans. Interestingly, the actual size of the student loan does not seem to matter – those with student loans have lower retirement savings, but retirement wealth accumulation is similar for those with small loans and large loans. Series: Boston College Working Papers in Economics Number: 1037 Creation-Date: 20210715 Keywords: student debt, saving Classification-JEL: G5, J32 File-URL: http://fmwww.bc.edu/EC-P/wp1037.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:1037 Template-Type: ReDIF-Paper 1.0 Title: Endogenous Uncertainty and Credit Crunches Author-Name: Ludwig Straub Author-X-Name-First: Ludwig Author-X-Name-Last: Straub Author-Person: pst944 Author-Email: ludwigstraub@fas.harvard.edu Author-Workplace-Name: Harvard University Author-Name: Robert Ulbricht Author-X-Name-First: Robert Author-X-Name-Last: Ulbricht Author-Person: pul38 Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: We develop a theory of endogenous uncertainty in which the ability of investors to learn about firm-level fundamentals is impaired during financial crises. At the same time, higher uncertainty reinforces financial distress. Through this two-way feedback loop, a temporary financial shock can cause a persistent reduction in risky lending, output, and employment that coincides with increased uncertainty, default rates, credit spreads and disagreement among forecasters. We embed our mechanism into standard real business cycle and New-Keynesian models and show how it generates endogenous and internally persistent processes for the efficiency and labor wedges. Keywords: Endogenous uncertainty, financial crises, internal persistence Classification-JEL: D83, E32, E44, G01 Series: Boston College Working Papers in Economics Number: 1036 Creation-Date: 20200626 Revision-Date: 20230113 File-URL: http://fmwww.bc.edu/EC-P/wp1036.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:1036 Template-Type: ReDIF-Paper 1.0 Title: Mechanism Design meets Priority Design: Redesigning the US Army’s Branching Process Through Market Design Author-Name: Kyle Greenberg Author-X-Name-First: Kyle Author-X-Name-Last: Greenberg Author-Workplace-Name: US Military Academy, West Point Author-EMail: kyle.greenberg@westpoint.edu Author-Name: Parag A. Pathak Author-X-Name-First: Parag Author-X-Name-Last: Pathak Author-Workplace-Name: MIT Author-Email: ppathak@mit.edu Author-Person: ppa503 Author-Name: Tayfun Sönmez Author-X-Name-First: Tayfun Author-X-Name-Last: Sönmez Author-Email: sonmezt@bc.edu Author-Person: psi57 Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: Army cadets obtain occupations through a centralized process. Three objectives – increasing retention, aligning talent, and enhancing trust – have guided reforms to this process since 2006. West Point’s mechanism for the Class of 2020 exacerbated challenges implementing Army policy aims. We formulate these desiderata as axioms and study their implications theoretically and with administrative data. We show that the Army’s objectives not only determine an allocation mechanism, but also a specific priority policy, a uniqueness result that integrates mechanism and priority design. These results led to a re-design of the mechanism, now adopted at both West Point and ROTC. Keywords: mechanism design, Army branch selection, priority design Series: Boston College Working Papers in Economics Number: 1035 Creation-Date: 20200610 Classification-JEL: C78, D47, D63, D78 File-URL: http://fmwww.bc.edu/EC-P/wp1035.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:1035 Template-Type: ReDIF-Paper 1.0 Title: For all or exists? Author-Name: Uzi Segal Author-X-Name-First: Uzi Author-X-Name-Last: Segal Author-Person: pse40 Author-Email: uzi.segal@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Series: Boston College Working Papers in Economics Number: 1034 Abstract: This paper shows that in some axioms regarding the mixture of random variables, the requirement that the conclusions hold for all values of the mixture parameter can be replaced by requiring the existence of only one non-trivial value of the parameter, which needs not be fixed. This is the case for the independence, betweenness, and the mixture symmetry axioms. Creation-Date: 20210428 Classification-JEL: D81 Keywords: Betweenness, independence axiom, mixture symmetry File-URL: http://fmwww.bc.edu/EC-P/wp1034.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:1034 Template-Type: ReDIF-Paper 1.0 Title: Dynamic Team Contests with Complementary Efforts Author-Name: Maria Arbatskaya Author-X-Name-First: Maria Author-X-Name-Last: Arbatskaya Author-Person: par31 Author-Workplace-Name: Emory University Author-Name: Hideo Konishi Author-X-Name-First: Hideo Author-X-Name-Last: Konishi Author-Person: pko35 Author-Email: konishih@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Series: Boston College Working Papers in Economics Number: 1033 Abstract: In this paper, we study dynamic team contests. In the framework of a Tullock contest between two teams generating impacts according to the Cobb-Douglas effort aggregation function, we examine how equilibrium efforts and winning probabilities depend on the timing of the actions. We show that in contrast to synchronous contests, asynchronous contests with publicly observable actions do not result in the same equilibrium outcome as the one-stage contest; they are strategically unbalancing, leading to more lopsided contests. The results have implications about the design of team contests with complementary efforts. Classification-JEL: C72, D23, D74 Keywords: team contest, group contest, complementarity in efforts, order of moves, commitment Creation-Date: 20210501 File-URL: http://fmwww.bc.edu/EC-P/wp1033.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:1033 Template-Type: ReDIF-Paper 1.0 Title: The Best at the Top? Candidate Ranking Strategies Under Closed List Proportional Representation Author-Name: Benoit S Y Crutzen Author-X-Name-First: Benoit Author-X-Name-Last: Crutzen Author-Workplace-Name: Erasmus School of Economics Author-Person: pcr177 Author-Name: Hideo Konishi Author-X-Name-First: Hideo Author-X-Name-Last: Konishi Author-Person: pko35 Author-Email: konishih@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Nicolas Sahuguet Author-X-Name-First: Nicolas Author-X-Name-Last: Sahuguet Author-Workplace-Name: HEC Montreal Series: Boston College Working Papers in Economics Number: 1032 Abstract: Under closed-list proportional representation, a partyís electoral list determines the order in which legislative seats are allocated to candidates. When candidates differ in their ability, parties face a trade-off between competence and incentives. Ranking candidates in decreasing order of competence ensures that elected politicians are most competent. Yet, party list create incentives for candidates that may push parties not to rank candidates in decreasing competence order. We examine this trade-off in a game-theoretical model in which parties rank their candidate on a list, candidates choose their campaign effort, and the election is a team contest for multiple prizes. We show that the trade-off between competence and incentives depends on candidatesíobjective and the electoral environment. In particular, parties rank candidates in decreasing order of competence if candidates value enough post-electoral high offices or media coverage focuses on candidates at the top of the list. Classification-JEL: C72, D72, D82 Keywords: voting, proportional representation, tradeoffs, ranking Creation-Date: 20210501 File-URL: http://fmwww.bc.edu/EC-P/wp1032.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:1032 Template-Type: ReDIF-Paper 1.0 Title: Social Networks with Mismeasured Links Author-Name: Arthur Lewbel Author-X-Name-First: Arthur Author-X-Name-Last: Lewbel Author-Person: ple43 Author-Email: lewbel@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Xi Qu Author-X-Name-First: Xi Author-X-Name-Last: Qu Author-WorkPlace-Name: Shanghai Jiao Tong University Author-Name: Xun Tang Author-X-Name-First: Xun Author-X-Name-Last: Tang Author-WorkPlace-Name: Rice University Author-Person: pta642 Abstract: We consider estimation of peer effects in social network models where some network links are incorrectly measured. We show that if the number of mismeasured links does not grow too quickly with the sample size, then standard instrumental variables estimators that ignore the measurement error remain consistent, and standard asymptotic inference methods remain valid. These results hold even when measurement errors in the links are correlated with regressors, or with the model errors. Monte Carlo simulations and real data experiments confirm our results in finite samples. These findings imply that researchers can ignore small amounts of measurement errors in networks. Keywords: Social networks, Peer e§ects, MisclassiÖed links, Missing links, Mismeasured network Classification-JEL: C31, C51 Series: Boston College Working Papers in Economics Number: 1031 Creation-Date: 20210428 File-URL: http://fmwww.bc.edu/EC-P/wp1031.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:1031 Template-Type: ReDIF-Paper 1.0 Title: The Impact of Oil Prices on World Trade Author-Name: Giulia Brancaccio Author-X-Name-First: Giulia Author-X-Name-Last: Brancaccio Author-Email: giulia.brancaccio@cornell.edu Author-WorkPlace-Name: Cornell University Author-Name: Myrto Kalouptsidi Author-X-Name-First: Myrto Author-X-Name-Last: Kalouptsidi Author-Email: myrto@fas.harvard.edu Author-WorkPlace-Name: Harvard University Author-Name: Theodore Papageorgiou Author-X-Name-First: Theodore Author-X-Name-Last: Papageorgiou Author-Person: ppa842 Author-Email: theodore.papageorgiou@bc.edu Author-WorkPlace-Name: Boston College Abstract: In this paper we investigate the importance of fuel costs in shaping world trade. We use AIS data on ship locations and transaction-level shipping prices, along with a dynamic model describing the world shipping industry, to measure the elasticity of trade with respect to ship fuel costs. We find that the average estimated elasticity is 0.35, but ranges from 0.1 to about 1.2 depending on the level of the fuel cost. The pass-through of fuel costs to transport costs is low, at 0.17. Strikingly, the trade elasticity features a pronounced asymmetry in low vs. high oil prices. As fuel costs decline, the elasticity plateaus and further declines have little impact on trade. This “flattening out” of the elasticity is attributed to the equilibrium of the transportation sector and in particular the changes in the relative bargaining positions of ships and exporters. Finally, we use the estimated elasticity to assess the importance of ship design on trade flows: if the large fuel efficiency gains achieved in the 1980s had not been realized, trade would be 12% lower today. Keywords: fuel costs, shipping, world trade, trade elasticity, oil prices, fuel efficiency, fuel cost pass-through Classification-JEL: F1, F64, L90, R4 Series: Boston College Working Papers in Economics Number: 1030 Creation-Date: 20210424 File-URL: http://fmwww.bc.edu/EC-P/wp1030.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:1030 Template-Type: ReDIF-Paper 1.0 Title: Risky Business Cycles Author-Name: Susanto Basu Author-X-Name-First: Susanto Author-X-Name-Last: Basu Author-Person: pba274 Author-WorkPlace-Name: Boston College Author-Name: Giacomo Candian Author-X-Name-First: Giacomo Author-X-Name-Last: Candian Author-Person: pca1464 Author-WorkPlace-Name: HEC Montréal Author-Name: Ryan Chahrour Author-X-Name-First: Ryan Author-X-Name-Last: Chahrour Author-Person: pch1111 Author-Email: ryan.chahrour@bc.edu Author-WorkPlace-Name: Boston College Author-Name: Rosen Valchev Author-X-Name-First: Rosen Author-X-Name-Last: Valchev Author-Person: pva831 Author-Email: rosen.valchev@bc.edu Author-WorkPlace-Name: Boston College Abstract: We identify a shock that explains the bulk of fluctuations in equity risk premia, and show that the shock also explains a large fraction of the business-cycle comovements of output, consumption, employment, and investment. Recessions induced by the shock are associated with reallocation away from full-time permanent positions, towards part-time and flexible contract workers. A real model with labor market frictions and fluctuations in risk appetite can explain all of these facts, both qualitatively and quantitatively. The size of risk-driven fluctuations depends on the relationship between the riskiness and productivity of different stores of value: if safe savings vehicles have relatively low marginal products, then a flight to safety will drive a larger aggregate contraction. Classification-JEL: E32, E24 Keywords: Business Cycles; Risk Premia; Uncertainty Series: Boston College Working Papers in Economics Number: 1029 Creation-Date: 20210407 File-URL: http://fmwww.bc.edu/EC-P/wp1029.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:1029 Template-Type: ReDIF-Paper 1.0 Title: Semiparametric Identification and Estimation of Multinomial Discrete Choice Models using Error Symmetry Author-Name: Arthur Lewbel Author-X-Name-First: Arthur Author-X-Name-Last: Lewbel Author-Person: ple43 Author-Email: lewbel@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Jin Yan Author-X-Name-First: Jin Author-X-Name-Last: Yan Author-WorkPlace-Name: Chinese University of Hong Kong Author-Name: Yu Zhou Author-X-Name-First: Yu Author-X-Name-Last: Zhou Author-WorkPlace-Name: School of Economics, Fudan University Abstract: We provide a new method to point identify and estimate cross-sectional multinomial choice models, using conditional error symmetry. Our model nests common random coefficient specifications (without having to specify which regressors have random coefficients), and more generally allows for arbitrary heteroskedasticity on most regressors, unknown error distribution, and does not require a "large support" "(such as identification at infinity) assumption. We propose an estimator that minimizes the squared di§erences of the estimated error density at pairs of symmetric points about the origin. Our estimator is root N consistent and asymptotically normal, making statistical inference straightforward. Keywords: Central Symmetry, Exclusion Restriction, Multinomial Discrete Choice Classification-JEL: C14, C35 Series: Boston College Working Papers in Economics Number: 1028 Creation-Date: 20210215 Revision-Date: 20211215 File-URL: http://fmwww.bc.edu/EC-P/wp1028.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:1028 Template-Type: ReDIF-Paper 1.0 Title: Allocation Mechanisms Without Reduction Author-Name: David Dillenberger Author-X-Name-First: David Author-X-Name-Last: Dillenberger Author-Workplace-Name: University of Pennsylvania Author-Email: ddill@sas.upenn.edu Author-Name: Uzi Segal Author-X-Name-First: Uzi Author-X-Name-Last: Segal Author-Person: pse40 Author-Email: uzi.segal@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Series: Boston College Working Papers in Economics Number: 1027 Abstract: We study a simple variant of the house allocation problem (one-sided matching). We demonstrate that agents with recursive preferences may systematically prefer one allocation mechanism to the other, even among mechanisms that are considered to be the same in standard models, in the sense that they induce the same probability distribution over successful matchings. Using this, we propose a new Priority Groups mechanism and provide conditions under which it is preferred to two popular mechanisms, Random Top Cycle and Random Serial Dictatorship. Creation-Date: 20210225 Classification-JEL: D81, C78 Keywords: House allocation problem, Non-expected utility, Random Top Cycle, Random Serial Dictatorship, Reduction of compound lotteries. Publication-Status: forthcoming, AEA Insights File-URL: http://fmwww.bc.edu/EC-P/wp1027.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:1027 Template-Type: ReDIF-Paper 1.0 Title: Can Economic Theory be Informative for the Judiciary? Affirmative Action in India via Vertical and Horizontal Reservations Author-Name: Tayfun Sönmez Author-X-Name-First: Tayfun Author-X-Name-Last: Sönmez Author-Email: sonmezt@bc.edu Author-Person: psi57 Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: M. Bumin Yenmez Author-X-Name-First: M. Bumin Author-X-Name-Last: Yenmez Author-Person: pye63 Author-Workplace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: Sanctioned by its constitution, India is home to the world’s most comprehensive affirmative action program, where historically discriminated groups are protected with vertical reservations implemented as “set asides,” and other disadvantaged groups are protected with horizontal reservations implemented as “minimum guarantees.” A mechanism mandated by the Supreme Court in 1995 suffers from important anomalies, triggering countless litigations in India. Foretelling a recent reform correcting the flawed mechanism, we propose the 2SMG mechanism that resolves all anomalies, and characterize it with desiderata reflecting laws of India. Subsequently rediscovered with a high court judgment and enforced in Gujarat, 2SMG is also endorsed by Saurav Yadav v. State of UP (2020), in a Supreme Court ruling that rescinded the flawed mechanism. While not explicitly enforced, 2SMG is indirectly enforced for an important subclass of applications in India, because no other mechanism satisfies the new mandates of the Supreme Court. Series: Boston College Working Papers in Economics Number: 1026 Note: Previously circulated as "Affirmative Action in India via Vertical, Horizontal, and Overlapping Reservations" Creation-Date: 20190315 Revision-Date: 20210623 Keywords: Market design, matching, affirmative action, vertical reservation, horizontal reservation Classification-JEL: C78, D47 File-URL: http://fmwww.bc.edu/EC-P/wp1026.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:1026 Template-Type: ReDIF-Paper 1.0 Title: Equilibrium Player Choices in Team Contests with Multiple Pairwise Battles Author-Name: Hideo Konishi Author-X-Name-First: Hideo Author-X-Name-Last: Konishi Author-Person: pko35 Author-Email: konishih@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Chen-Yu Pan Author-X-Name-First: Chen-Yu Author-X-Name-Last: Pan Author-Workplace-Name: Wuhan University Author-Email: panwhu@126.com Author-Name: Dimitar Simeonov Author-X-Name-First: Dimitar Author-X-Name-Last: Simeonov Author-Email: simeonov@bc.edu Author-WorkPlace-Name: Boston College Series: Boston College Working Papers in Economics Number: 1025 Abstract: We consider games in which team leaders strategically choose the order of players sent to the battlefield in majoritarian team contests with multiple pairwise battles as in Fu, Lu, and Pan (2015 American Economic Review). We consider one-shot order choice games and battle-by-battle sequential player choice games. We show that as long as the number of players on each team is the same as the number of battles, the equilibrium winning probability of a team and the ex ante expected effort of each player in a multi-battle contest are independent of whether players' assignments are one-shot or battle-by-battle sequential. This equilibrium winning probability and ex ante expected total effort coincide with those where the player matching is chosen totally randomly with an equal probability lottery by the contest organizer. Finally, we show how player choices add subtleties to the equivalence result by examples. Classification-JEL: C72, D72, D74, D82 Keywords: group contest, team contest, multi-battle contest, sports economics Creation-Date: 20210122 File-URL: http://fmwww.bc.edu/EC-P/wp1025.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:1025 Template-Type: ReDIF-Paper 1.0 Title: Effort Complementarity and Sharing Rules in Group Contests Author-Name: Hideo Konishi Author-X-Name-First: Hideo Author-X-Name-Last: Konishi Author-Person: pko35 Author-Email: konishih@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Katsuya Kobayashi Author-X-Name-First: Katsuya Author-X-Name-Last: Kobayashi Author-Workplace-Name: Hosei University Series: Boston College Working Papers in Economics Number: 1024 Abstract: In this paper, we consider a prize-sharing rule design problem in a group contest with effort complementarities within groups by employing a CES effort aggregator function. We derive the conditions for a monopolization rule that dominates an egalitarian rule if the objective of the rule design is to maximize the group's winning probability. We find conditions under which the monopolization rule maximizes the group's winning probability, while the egalitarian rule is strictly preferred by all members of the group. Without effort complementarity, there cannot be such a conflict of interest. Classification-JEL: C72, D23, D74 Keywords: group contest, complementarity in efforts, free riding, prize sharing rule Creation-Date: 20200410 File-URL: http://fmwww.bc.edu/EC-P/wp1024.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:1024 Template-Type: ReDIF-Paper 1.0 Title: Do Public Sector Workers Increase Their Outside Savings in Response to Pension Cuts? Author-Name: Laura D. Quinby Author-X-Name-First: Laura Author-X-Name-Last: Quinby Author-Email: quinbyl@bc.edu Author-WorkPlace-Name: Center for Retirement Research at Boston College Author-Name: Geoffrey Sanzenbacher Author-X-Name-First: Geoffrey Author-X-Name-Last: Sanzenbacher Author-WorkPlace-Name: Boston College Author-Person: psa1308 Abstract: As state and local policymakers enact benefit cuts to reduce the cost of their pension systems, the life-cycle model suggests that workers will adjust by saving more on their own. But, whether workers actually respond to pension characteristics remains an open question. After all, income received far in the future may not be salient to young workers deciding how much of their earnings to consume in the present. To answer the question, this paper links the Survey of Income and Program Participation to the Public Plans Database and explores whether state and local workers consider the amount of their pension savings, the funded status of their plan, or their Social Security coverage when deciding whether to participate in a supplemental defined contribution (DC) plan. Series: Boston College Working Papers in Economics Number: 1023 Creation-Date: 20210122 Keywords: pension systems, benefits, savings Classification-JEL: J26, J32, J45 File-URL: http://fmwww.bc.edu/EC-P/wp1023.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:1023 Template-Type: ReDIF-Paper 1.0 Title: Identification of a Triangular Two Equation System Without Instruments Author-Name: Arthur Lewbel Author-X-Name-First:Arthur Author-X-Name-Last: Lewbel Author-Person: ple43 Author-Email: lewbel@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Susanne M. Schennach Author-X-Name-First: Susanne Author-X-Name-Last: Schennach Author-Workplace-Name: Brown University Author-Person: psc367 Author-Email: smschenn@brown.edu Author-Name: Linqi Zhang Author-X-Name-First: Linqi Author-X-Name-Last: Zhang Author-Workplace-Name: Boston College Abstract: We show that a standard linear triangular two equation system can be point identified, without the use of instruments or any other side information. We find that the only case where the model is not point identified is when a latent variable that causes endogeneity is normally distributed. In this non-identified case, we derive the sharp identified set. We apply our results to Acemoglu and Johnson’s (2007) model of life expectancy and GDP, obtaining point identification and comparable estimates to theirs, without using their (or any other) instrument. Keywords: Returns to schooling, identification, triangular system, Kotlarski, deconvolution Classification-JEL: C14, C30 Series: Boston College Working Papers in Economics Number: 1022 Creation-Date: 20201220 Revision-Date: 20221215 File-URL: http://fmwww.bc.edu/EC-P/wp1022.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:1022 Template-Type: ReDIF-Paper 1.0 Title: Pound for Pound Export Diversification Author-Name: James E. Anderson Author-X-Name-First: James Author-X-Name-Last: Anderson Author-Person: pan2 Author-Email: anderson@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Yoto V. Yotov Author-X-Name-First: Yoto Author-X-Name-Last: Yotov Author-Workplace-Name: Drexel University Author-Person: pyo93 Abstract: We propose a short-run model of the extensive margin of trade and deploy it to distinguish and quantify domestic and cross-border margins. Our empirical focus is on the domestic extensive margin of trade (domestic distribution of a product) and its importance for quantifying policy and globalization effects on the international extensive margin of trade. We build a dataset that combines data on the domestic extensive margin and the standard international extensive margin. It reveals significant and intuitive variation in the domestic extensive margin across countries and over time. We quantify the extensive margin effects of European Union (EU) integration, 2008-2018, and demonstrate that these effects cannot be identified without the domestic extensive margin. We find strong and highly heterogeneous effects, both across countries and directionally. Series: Boston College Working Papers in Economics Number: 1021 Creation-Date: 20201220 Keywords: Extensive Margin, Domestic Extensive Margin, Globalization, Gravity Classification-JEL: F13, F14, F16 File-URL: http://fmwww.bc.edu/EC-P/wp1021.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:1021 Template-Type: ReDIF-Paper 1.0 Title: Latent Exports: Almost Ideal Gravity and Zeros Author-Name: James E. Anderson Author-X-Name-First: James Author-X-Name-Last: Anderson Author-Person: pan2 Author-Email: anderson@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Penglong Zhang Author-X-Name-First: Penglong Author-X-Name-Last: Zhang Author-Workplace-Name: Tsinghua University, School of Public Policy and Management Author-Email: zhangpenglong@tsinghua.edu.cn Author-Person: pzh894 Abstract: Almost Ideal gravity associates zero trade flows with variable and fixed trade cost variation in a flexible demand system. Latent trade shares between non-partners are inferred from the Tobit estimator applied to trade among 75 countries and 25 sectors in 2006. Latent Trade Bias (LTB) is the difference between the latent trade share and the as-if-frictionless trade share. Explained LTB variance decomposition shows 52% due to variation of variable trade cost, 24% due to non-homothetic income effects, and 24% due to fixed trade cost effects. Counterfactual variable (fixed) cost reductions suggest cases of successful export promotion between non-partners. Series: Boston College Working Papers in Economics Number: 1020 Creation-Date: 20201215 Keywords: Zero flows; variable cost; fixed cost; latent trade Classification-JEL: F10, F13, F14 File-URL: http://fmwww.bc.edu/EC-P/wp1020.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:1020 Template-Type: ReDIF-Paper 1.0 Title: Do Black and Indigenous Communities Receive their Fair Share of Vaccines Under the 2018 CDC Guidelines? Author-Name: Parag A. Pathak Author-X-Name-First: Parag Author-X-Name-Last: Pathak Author-Workplace-Name: MIT Author-Email: ppathak@mit.edu Author-Person: ppa503 Author-Name: Harald Schmidt Author-X-Name-First: Harald Author-X-Name-Last: Schmidt Author-Workplace-Name: University of Pennsylvania Author-Email: schmidth@upenn.edu Author-Name: Adam Solomon Author-X-Name-First: Adam Author-X-Name-Last: Solomon Author-Workplace-Name: MIT Author-Email: adamsol@mit.edu Author-Name: Edwin Song Author-X-Name-First: Edwin Author-X-Name-Last: Song Author-Workplace-Name: MIT Author-Email: song22@mit.edu Author-Name: Tayfun Sönmez Author-X-Name-First: Tayfun Author-X-Name-Last: Sönmez Author-Email: sonmezt@bc.edu Author-Person: psi57 Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: M. Utku Ünver Author-X-Name-First: M. Author-X-Name-Last: Ünver Author-Person: pun2 Author-Email: unver@bc.edu Author-Workplace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: A major focus of debate about rationing guidelines for COVID-19 vaccines is whether and how to prioritize access for minority populations that have been particularly affected by the pandemic, and been the subject of historical and structural disadvantage, particularly Black and Indigenous individuals. We simulate the 2018 CDC Vaccine Allocation guidelines using data from the American Community Survey under different assumptions on total vaccine supply. Black and Indigenous individuals combined receive a higher share of vaccines compared to their population share for all assumptions on total vaccine supply. However, their vaccine share under the 2018 CDC guidelines is considerably lower than their share of COVID-19 deaths and age-adjusted deaths. We then simulate one method to incorporate disadvantage in vaccine allocation via a reserve system. In a reserve system, units are placed into categories and units reserved for a category give preferential treatment to individuals from that category. Using the Area Deprivation Index (ADI) as a proxy for disadvantage, we show that a 40% high-ADI reserve increases the number of vaccines allocated to Black or Indigenous individuals, with a share that approaches their COVID-19 death share when there are about 75 million units. Our findings illustrate that whether an allocation is equitable depends crucially on the benchmark and highlight the importance of considering the expected distribution of outcomes from implementing vaccine allocation guidelines. Keywords: ethical rationing, vaccines, minority populations, Blacks, Indigenous peoples Series: Boston College Working Papers in Economics Number: 1019 Creation-Date: 20200905 Classification-JEL: File-URL: http://fmwww.bc.edu/EC-P/wp1019.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:1019 Template-Type: ReDIF-Paper 1.0 Title: Are We There? Differences in Search, Preferences and Jobs between Young Highly Educated Male and Female Workers Author-Name: Ilaria D’Angelis Author-X-Name-First: Ilaria Author-X-Name-Last: D’Angelis Author-Email: dangelii@bc.edu Author-WorkPlace-Name: Boston College Abstract: Do young highly educated women face higher job search frictions, have stronger preferences for non wage job-specific amenities, and receive job offers entailing lower hourly wages or stronger wage penalties for amenities provision relative to men? I study a recent cohort of young, highly educated American workers, document the existence of a gender pay gap at the beginning of workers’ careers, and provide evidence that its increasing path over years in the labor market can be rationalized by underlying unobservable differences in search frictions, preferences for amenities, and in the characteristics of the job offers that workers receive. Building on the descriptive evidence I collect, I answer the questions above by estimating a model of hedonic job search. I use the estimated parameters to show that young workers’ predicted utility from jobs can be decomposed into components due to wage and wage penalties/gains for amenities provision in the job offers received, preferences for amenities, and workers’ selection into different jobs. The main amenities of interest are flexible schedule, overtime, paid and unpaid parental leave, and child care. I find that young, highly educated male and female employed workers are remarkably similar in terms of both search frictions and preferences for job attributes, while female unemployed workers are less likely to obtain job offers than men, in spite of similar levels of labor market attachment. The job offers that women face, instead, differ from the job offers that men receive. Women tend to be offered low wages, and obtain lower wage gains attached to the provision of amenities relative to men. Wages and amenities-related wage penalties strongly affect the predicted male-to-female gap in utility that young workers obtain from jobs, especially in executive and professional careers. In addition, lower wage gains (or wage losses) that women experience when amenities are provided, tend to expand the gender wage gap in jobs providing benefits like flexibility and parental leave. Classification-JEL: J16, J31, J32, J64 Keywords: gender wage gap, nonwage benefits, job search, early careers Series: Boston College Working Papers in Economics Number: 1018 Creation-Date: 20201024 File-URL: http://fmwww.bc.edu/EC-P/wp1018.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:1018 Template-Type: ReDIF-Paper 1.0 Title: Optimal Foresight Author-Name: Ryan Chahrour Author-X-Name-First: Ryan Author-X-Name-Last: Chahrour Author-Person: pch1111 Author-Email: ryan.chahrour@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Kyle Jurado Author-X-Name-First: Kyle Author-X-Name-Last: Jurado Author-WorkPlace-Name: Duke University Author-Email: kyle.jurado@duke.edu Abstract: Agents have foresight when they receive information about a random process above and beyond the information contained in its current and past history. In this paper, we propose an information-theoretic measure of the quantity of foresight in an information structure, and show how to separate informational assumptions about foresight from physical assumptions about the dynamics of the processes itself. We then develop a theory of endogenous foresight in which the type of foresight is chosen optimally by economic agents. In a prototypical dynamic model of consumption and saving, we derive a closed-form solution to the optimal foresight problem. Classification-JEL: D83; D84; E21 Keywords: expectations; rational inattention; incomplete information; noise shocks Series: Boston College Working Papers in Economics Number: 1017 Creation-Date: 20200911 File-URL: http://fmwww.bc.edu/EC-P/wp1017.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:1017 Template-Type: ReDIF-Paper 1.0 Title: “I’ll See You in School”: A Multiple Proxy Analysis of the Role of Parental Involvement in K-12 Education and Improved Student Outcomes Author-Name: Chandini Sankaran Author-X-Name-First: Chandini Author-X-Name-Last: Sankaran Author-Email: chandini.sankaran@bc.edu Author-Person: psa1528 Author-WorkPlace-Name: Boston College Author-Name: Olivia Sorrentino Author-X-Name-First: Olivia Author-X-Name-Last: Sorrentino Author-Email: sorrenol@bc.edu Author-WorkPlace-Name: Boston College Author-Name: Eva Hernandez Author-X-Name-First: Eva Author-X-Name-Last: Hernandez Author-Email: hernangw@bc.edu Author-WorkPlace-Name: Boston College Abstract: We analyze the role of parental involvement on a child’s academic performance by employing multiple proxies for direct and indirect parental involvement in his/her child’s schooling using a large dataset of 11,913 observations from the 2016 National Household Education Survey (NHES (2016)). Our estimations of ordered logit grade models show that children of parents who volunteer in the school or classroom, serve on a school committee, or attend PTO meetings are significantly more likely to receive higher grades; these children are 2.4% to 11% more likely to be making grades of mostly As compared to children of parents who do not engage in these activities. Elementary aged children who are told by their parents to read are also significantly more likely to receive higher grades in school. However, we find that homework help is a noisy proxy for parental involvement. Finally, our analysis uncovers some stark racial and gender disparities in K-12 student performance as well as racial differences in the parental involvement measures. Keywords: K-12, school, parental involvement, academic performance Classification-JEL: I20, I29 Series: Boston College Working Papers in Economics Number: 1016 Creation-Date: 20200809 File-URL: http://fmwww.bc.edu/EC-P/wp1016.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:1016 Template-Type: ReDIF-Paper 1.0 Title: Fair Allocation of Vaccines, Ventilators and Antiviral Treatments: Leaving No Ethical Value Behind in Health Care Rationing Author-Name: Parag A. Pathak Author-X-Name-First: Parag Author-X-Name-Last: Pathak Author-Workplace-Name: MIT Author-Email: ppathak@mit.edu Author-Person: ppa503 Author-Name: Tayfun Sönmez Author-X-Name-First: Tayfun Author-X-Name-Last: Sönmez Author-Email: sonmezt@bc.edu Author-Person: psi57 Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: M. Utku Ünver Author-X-Name-First: M. Author-X-Name-Last: Ünver Author-Person: pun2 Author-Email: unver@bc.edu Author-Workplace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: M. Bumin Yenmez Author-X-Name-First: M. Bumin Author-X-Name-Last: Yenmez Author-Person: pye63 Author-Email: yenmezm@bc.edu Author-Workplace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: COVID-19 has revealed several limitations of existing mechanisms for rationing scarce medical resources under emergency scenarios. Many argue that they abandon various ethical values such as equity by discriminating against disadvantaged communities. Illustrating that these limitations are aggravated by a restrictive choice of mechanism, we formulate pandemic rationing of medical resources as a new application of market design and propose a reserve system as a resolution. We develop a general theory of reserve design, introduce new concepts such as cutoff equilibria and smart reserves, extend previously-known ones such as sequential reserve matching, and relate these concepts to current debates. Keywords: ethical rationing, reserve system, COVID-19, vaccine, ventilator Series: Boston College Working Papers in Economics Number: 1015 Creation-Date: 20200731 Classification-JEL: D45, D47, I14 File-URL: http://fmwww.bc.edu/EC-P/wp1015.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:1015 Template-Type: ReDIF-Paper 1.0 Title: The impact of offshoring on productivity and innovation: Evidence from Swedish manufacturing firms Author-Name: Christopher F. Baum Author-X-Name-First: Christopher Author-X-Name-Last: Baum Author-Person: pba1 Author-Email: baum@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Workplace-Name: DIW Berlin Author-Workplace-Name: CESIS, KTH Royal Institute of Technology Author-Name: Hans Lööf Author-X-Name-First: Hans Author-X-Name-Last: Lööf Author-Person: plf1 Author-Workplace-Name: CESIS, KTH Royal Institute of Technology Author-Email: hans.loof@indek.kth.se Author-Name: Andreas Stephan Author-X-Name-First: Andreas Author-X-Name-Last: Stephan Author-Workplace-Name: Jönköping International Business School Author-Workplace-Name: DIW Berlin Author-Email: andreas.stephan@ju.se Author-Person: pst185 Author-Name: Ingrid Viklund-Ros Author-X-Name-First: Ingrid Author-X-Name-Last: Viklund-Ros Author-Workplace-Name: CESIS, KTH Royal Institute of Technology Abstract: This paper examines the impact of offshoring on total factor productivity (TFP) and innovation measured by patent applications. It applies instrumental variable and matching approaches on a panel of about 7,500 Swedish manufacturing firms over the period 2001--2014, and identifies offshoring-related intermediate imports by the United Nations Broad Economic Categories system. Accounting for selection and simultaneity bias, no causal impact on TFP can be established, while the estimated positive effect on innovation is found to be weakly significant. Keywords: offshoring, patent, trademark, innovation, productivity, panel data Classification-JEL: C23, F23, O47, O33, O52 Publication-Status: published, Review of International Economics, 2022, 30:796-818 Series: Boston College Working Papers in Economics Number: 1014 Creation-Date: 20200731 Revision-Date: 20210419 File-URL: http://fmwww.bc.edu/EC-P/wp1014.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:1014 Template-Type: ReDIF-Paper 1.0 Title: Credit Constraints anf Firms' Decisions: Evidence from the COVID-19 Outbreak Italian Firms’ Expectations and Plans Author-Name: Pierluigi Balduzzi Author-X-Name-First: Pierluigi Author-X-Name-Last: Balduzzi Author-Person: pba469 Author-WorkPlace-Name: Boston College Author-Name: Emanuele Brancati Author-X-Name-First: Emanuele Author-X-Name-Last: Brancati Author-Person: pbr559 Author-WorkPlace-Name: Sapienza University of Rome Author-Name: Marco Brianti Author-X-Name-First: Marco Author-X-Name-Last: Brianti Author-Person: pbr787 Author-WorkPlace-Name: Boston College Author-Name: Fabio Schiantarelli Author-X-Name-First: Fabio Author-X-Name-Last: Schiantarelli Author-Email: schianta@bc.edu Author-Person: psc8 Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Workplace-Name: IZA Abstract: This paper takes advantage of unique survey data on Italian firms to investigate the role played by credit constraints in the transmission of the shocks generated by the COVID-19 outbreak. These data, collected just before and just after the onset of the pandemic, allow us to study how revisions of firms’ expectations and plans are shaped by a survey-based measure of credit constraints that uses information about the outcome of past loan applications. Our results show that the lack of access to credit strongly amplifies the negative effects on planned factor demand and expected sales of the pandemic shock. Moreover, credit-constrained firms, in their search for liquidity, plan to charge significantly higher prices relative to their unconstrained counterparts. Series: Boston College Working Papers in Economics Number: 1013 Creation-Date: 20200727 Revision-Date: 20221007 Keywords: COVID-19, firms, credit constraints, expectations, prices, employment, investment, sales prices, employment, investment, sales, orders Classification-JEL: E2, E3, G30, I10 Note: Previously circulated as "The Economic Effects of COVID-19 and Credit Constraints: Evidence from Italian Firms’ Expectations and Plans" File-URL: http://fmwww.bc.edu/EC-P/wp1013.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:1013 Template-Type: ReDIF-Paper 1.0 Title: Good News and Bad News about Newly Imagined Federal Reserve Credit-Allocation Policies Author-Name: Edward J. Kane Author-X-Name-First: Edward Author-X-Name-Last: Kane Author-Person: pka853 Author-Email: edward.kane@bc.edu Author-WorkPlace-Name: Boston College Abstract: This paper analyzes the characteristics of the ad hoc credit facilities provided by the Federal Reserve System, newly authorized by the CARES Act of 2020, and expresses concerns about those programs' effectiveness. The paper stresses the importance of resolving unaddressed re-contracting problems in the real-estate sector. Keywords: Covid-19, Federal Reserve, credit allocation, monetary policy Classification-JEL: E52, E61, E65 Series: Boston College Working Papers in Economics Number: 1012 Creation-Date: 20200623 File-URL: http://fmwww.bc.edu/EC-P/wp1012.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:1012 Template-Type: ReDIF-Paper 1.0 Title: Occupational Matching and Cities Author-Name: Theodore Papageorgiou Author-X-Name-First: Theodore Author-X-Name-Last: Papageorgiou Author-Person: ppa842 Author-Email: theodore.papageorgiou@bc.edu Author-WorkPlace-Name: Boston College Abstract: In this paper, I document that workers in larger cities have significantly more occupational options than workers in smaller ones. They are able to form better occupational matches and earn higher wages. I also note differences in the occupational reallocation patterns across cities. I develop a dynamic model of occupational choice that microfounds agglomeration economies and captures the empirical patterns. The calibration of the model suggests that better occupational match quality accounts for approximately 35% of the observed wage premium and a third of the greater inequality in larger cities. Keywords: Occupations, Agglomeration Economies, Urban Wage Premium, Multi-armed Bandits, Geographical Mobility, Matching Theory, Wage Inequality, Job Vacancy Postings Classification-JEL: J24, J31, R23 Series: Boston College Working Papers in Economics Number: 1011 Creation-Date: 20200614 File-URL: http://fmwww.bc.edu/EC-P/wp1011.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:1011 Template-Type: ReDIF-Paper 1.0 Title: Search Frictions and Efficiency in Decentralized Transport Markets Author-Name: Giulia Brancaccio Author-X-Name-First: Giulia Author-X-Name-Last: Brancaccio Author-Email: giulia.brancaccio@cornell.edu Author-WorkPlace-Name: Cornell University Author-Name: Myrto Kalouptsidi Author-X-Name-First: Myrto Author-X-Name-Last: Kalouptsidi Author-Email: myrto@fas.harvard.edu Author-WorkPlace-Name: Harvard University Author-Name: Theodore Papageorgiou Author-X-Name-First: Theodore Author-X-Name-Last: Papageorgiou Author-Person: ppa842 Author-Email: theodore.papageorgiou@bc.edu Author-WorkPlace-Name: Boston College Author-Name: Nicola Rosaia Author-X-Name-First: Nicola Author-X-Name-Last: Rosaia Author-Email: nicolarosaia@g.harvard.edu Author-WorkPlace-Name: Harvard University Abstract: In this paper we explore efficiency and optimal policy in decentralized transportation markets that suffer from search frictions, such as taxicabs, trucks and bulk shipping. We illustrate the impact of two externalities: the well-known thin/thick market externalities and what we call pooling externalities. We characterize analytically the conditions for efficiency, show how they translate into efficient pricing rules, as well as derive the optimal taxes for the case where the planner is not able to set prices. We use our theoretical results to explore welfare loss and optimal policy in dry bulk shipping. We find that the constrained efficient allocation achieves 6% welfare gains, while the first-best allocation corresponding to the frictionless world, achieves 14% welfare gains. This suggests that policy can achieve substantial gains, even if it does not alleviate search frictions, e.g. through a centralizing platform. Finally, we demonstrate that simple policies designed to mimic the optimal taxes perform well. Keywords: search, friction, efficiency, transport, optimal policy Classification-JEL: F1, L0, L91, R4, R48 Series: Boston College Working Papers in Economics Number: 1010 Creation-Date: 20200515 File-URL: http://fmwww.bc.edu/EC-P/wp1010.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:1010 Template-Type: ReDIF-Paper 1.0 Title: Socioeconomic Factors influencing the Spatial Spread of COVID-19 in the United States Author-Name: Christopher F Baum Author-X-Name-First: Christopher Author-X-Name-Last: Baum Author-Person: pba1 Author-Email: baum@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Workplace-Name: DIW Berlin Author-Name: Miguel Henry Author-X-Name-First: Miguel Author-X-Name-Last: Henry Author-WorkPlace-Name: Greylock McKinnon Associates Author-Email: mhenry@gma-us.com Author-Person: phe668 Abstract: As the COVID-19 pandemic has progressed in the U.S., "hotspots" have been shifting geographically over time to suburban and rural counties showing a high prevalence of the disease. We analyze daily U.S. county-level variations in COVID-19 confirmed case counts to evaluate the spatial dependence between neighboring counties. We find strong evidence of county-level socioeconomic factors influencing the spatial spread. We show the potential of combining spatial econometric techniques and socioeconomic factors in assessing the spatial effects of COVID-19 among neighboring counties. Keywords: COVID-19, coronavirus, socioeconomic factors, spillover effects, spatial econometrics Classification-JEL: C13, C21, R15, R23 Series: Boston College Working Papers in Economics Number: 1009 Creation-Date: 20200529 Revision-Date: 20201002 Handle: RePEc:boc:bocoec:1009 Template-Type: ReDIF-Paper 1.0 Title: Institutional diversity in domestic banking sectors and bank stability: A cross-country study Author-Name: Christopher F Baum Author-X-Name-First: Christopher Author-X-Name-Last: Baum Author-Person: pba1 Author-Email: baum@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Workplace-Name: DIW Berlin Author-Name: Caterina Forti Grazzini Author-X-Name-First: Caterina Author-X-Name-Last: Grazzini Author-WorkPlace-Name: European Central Bank Author-Workplace-Name: FU Berlin Author-Email: cfortigrazzini@diw.de Author-Name: Dorothea Schäfer Author-X-Name-First: Dorothea Author-X-Name-Last: Schäfer Author-Person: psc175 Author-Workplace-Name: DIW Berlin Author-WorkPlace-Name: Jönköping International Business School Author-Email: dschaefer@diw.de Abstract: This paper analyzes the causal relationship between institutional diversity in domestic banking sectors and bank stability. We use a large bank- and country-level unbalanced panel data set covering the EU member states’ banking sectors between 1998 and 2014. Constructing two distinct indicators for measuring institutional diversity, we find that a high degree of institutional diversity in the domestic banking sector positively affects bank stability. The positive relationship between domestic institutional diversity and bank stability is stronger in times of crisis, providing evidence that diversity can help to absorb both financial and real shocks. In particular, greater institutional diversity smooths bank earnings risk in times of crisis. Our results are economically meaningful and offer important insights to the ongoing economic policy debate on how to reshape the architecture of the banking sector. Keywords: Institutional Diversity; Shannon Index; Gini-Simpson Index; Bank Stability; Financial Crisis; Bank Competition Classification-JEL: G01, G20, G21, G28 Series: Boston College Working Papers in Economics Number: 1008 Creation-Date: 20200509 File-URL: http://fmwww.bc.edu/EC-P/wp1008.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:1008 Template-Type: ReDIF-Paper 1.0 Title: Paying It Backward and Forward: Expanding Access to Convalescent Plasma Therapy Through Market Design Author-Name: Scott Duke Kominers Author-X-Name-First: Scott Author-X-Name-Last: Kominers Author-Person: pko394 Author-Workplace-Name: Harvard University Author-EMail: kominers@fas.harvard.edu Author-Name: Parag A. Pathak Author-X-Name-First: Parag Author-X-Name-Last: Pathak Author-Workplace-Name: MIT Author-Email: ppathak@mit.edu Author-Person: ppa503 Author-Name: Tayfun Sönmez Author-X-Name-First: Tayfun Author-X-Name-Last: Sönmez Author-Email: sonmezt@bc.edu Author-Person: psi57 Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: M. Utku Ünver Author-X-Name-First: M. Author-X-Name-Last: Ünver Author-Person: pun2 Author-Workplace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Email: unver@bc.edu Abstract: COVID-19 convalescent plasma (CCP) therapy is currently a leading treatment for COVID-19. At present, there is a shortage of CCP relative to demand. We develop and analyze a model of centralized CCP allocation that incorporates both donation and distribution. In order to increase CCP supply, we introduce a mechanism that utilizes two incentive schemes, respectively based on principles of “paying it backward” and “paying it forward.” Under the first scheme, CCP donors obtain treatment vouchers that can be transferred to patients of their choosing. Under the latter scheme, patients obtain priority for CCP therapy in exchange for a future pledge to donate CCP if possible. We show that in steady-state, both principles generally increase overall treatment rates for all patients—not just those who are voucher-prioritized or pledged to donate. Our results also hold under certain conditions if a fraction of CCP is reserved for patients who participate in clinical trials. Finally, we examine the implications of pooling blood types on the efficiency and equity of CCP distribution. Keywords: COVID-19, convalescent plasma, vouchers Series: Boston College Working Papers in Economics Number: 1007 Creation-Date: 20200504 Classification-JEL: D47, C78 File-URL: http://fmwww.bc.edu/EC-P/wp1007.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:1007 Template-Type: ReDIF-Paper 1.0 Title: Beyond Cobb-Douglas: Flexibly Estimating Matching Functions with Unobserved Matching Efficiency Author-Name: Fabian Lange Author-X-Name-First: Fabian Author-X-Name-Last: Lange Author-Person: pla224 Author-Email: fabian.lange@mcgill.ca Author-WorkPlace-Name: McGill University Author-Name: Theodore Papageorgiou Author-X-Name-First: Theodore Author-X-Name-Last: Papageorgiou Author-Person: ppa842 Author-Email: theodore.papageorgiou@bc.edu Author-WorkPlace-Name: Boston College Abstract: Exploiting results from the literature on non-parametric identification, we make three methodological contributions to the empirical literature estimating the matching function, commonly used to map unemployment and vacancies into hires. First, we show how to non-parametrically identify the matching function. Second, we estimate the matching function allowing for unobserved matching efficacy, without imposing the usual independence assumption between matching efficiency and search on either side of the labor market. Third, we allow for multiple types of jobseekers and consider an “augmented” Beveridge curve that includes them. Our estimated elasticity of hires with respect to vacancies is procyclical and varies between 0.15 and 0.3. This is substantially lower than common estimates suggesting that a significant bias stems from the commonly-used independence assumption. Moreover, variation in match efficiency accounts for much of the decline in hires during the Great Recession. Keywords: matching function, unemployment, hires Classification-JEL: E32, J63, J64 Series: Boston College Working Papers in Economics Number: 1006 Creation-Date: 20200414 File-URL: http://fmwww.bc.edu/EC-P/wp1006.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:1006 Template-Type: ReDIF-Paper 1.0 Title: Sparse demand systems: corners and complements Author-Name: Arthur Lewbel Author-X-Name-First: Arthur Author-X-Name-Last: Lewbel Author-Person: ple43 Author-Email: lewbel@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Lars Nesheim Author-X-Name-First: Lars Author-X-Name-Last: Nesheim Author-Person: pne123 Author-Email: l.nesheim@ucl.ac.uk Author-WorkPlace-Name: CeMMAP Abstract: We propose a demand model where consumers simultaneously choose a few different goods from a large menu of available goods, and choose how much to consume of each good. The model nests multinomial discrete choice and continuous demand systems as special cases. Goods can be substitutes or complements. Random coefficients are employed to capture the wide variation in the composition of consumption baskets. Non-negativity constraints produce corners that account for different consumers purchasing different numbers of types of goods. We show semiparametric identification of the model. We apply the model to the demand for fruit in the United Kingdom. We estimate the model’s parameters using UK scanner data for 2008 from the Kantar World Panel. Using our parameter estimates, we estimate a matrix of demand elasticities for 27 categories of fruit and analyze a range of tax and policy change scenarios. Keywords: sparse demand, discrete choice, continuous choice, complements, complementarity, substitutes, demand estimation, scanner data, fruit, quadratic utility Classification-JEL: C13, C34, D12, L40, L66 Series: Boston College Working Papers in Economics Number: 1005 Creation-Date: 20191115 File-URL: http://fmwww.bc.edu/EC-P/wp1005.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:1005 Template-Type: ReDIF-Paper 1.0 Title: Social Networks with Unobserved Links Author-Name: Arthur Lewbel Author-X-Name-First: Arthur Author-X-Name-Last: Lewbel Author-Person: ple43 Author-Email: lewbel@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Xi Qu Author-X-Name-First: Xi Author-X-Name-Last: Qu Author-WorkPlace-Name: Shanghai Jiao Tong University Author-Name: Xun Tang Author-X-Name-First: Xun Author-X-Name-Last: Tang Author-Person: pta642 Author-WorkPlace-Name: Rice University Abstract: We point identify and estimate linear social network models without observing any network links. The required data consist of many small networks of individuals, such as classrooms or villages, with individuals that are each only observed once. We apply our estimator to data from Tennessee's Student/Teacher Achievement Ratio (STAR) Project. Without observing the latent network in each classroom, we identify and estimate peer and contextual effects on students' performance in mathematics. We find that peer effects tend to be larger in bigger classes, and that increasing peer effects would significantly improve students' average test scores. Keywords: Social networks, Peer effects, Unobserved network, Classroom performance Note: previously circulated as "Social Networks with Misclassified or Unobserved Links" Classification-JEL: C31, I21, C51 Series: Boston College Working Papers in Economics Number: 1004 Creation-Date: 20190730 Revision-Date: 20220715 File-URL: http://fmwww.bc.edu/EC-P/wp1004.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:1004 Template-Type: ReDIF-Paper 1.0 Title: Over-Identified Doubly Robust Identification and Estimation Author-Name: Arthur Lewbel Author-X-Name-First: Arthur Author-X-Name-Last: Lewbel Author-Person: ple43 Author-Email: lewbel@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Jin-Young Choi Author-X-Name-First: Jin-Young Author-X-Name-Last: Choi Author-Person: pch1338 Author-Email: jinyoungchoi1984@gmail.com Author-WorkPlace-Name: Xiamen University Author-Name: Zhuzhu Zhou Author-X-Name-First: Zhuzhu Author-X-Name-Last: Zhou Author-Email: zhuzhu.zhou@bc.edu Author-WorkPlace-Name: Xiamen University Abstract: Consider two parametric models. At least one is correctly specified, but we don't know which. Both models include a common vector of parameters. An estimator for this common parameter vector is called Doubly Robust (DR) if it's consistent no matter which model is correct. We provide a general technique for constructing DR estimators (assuming the models are over identified). Our Over-identified Doubly Robust (ODR) technique is a simple extension of the Generalized Method of Moments. We illustrate our ODR with a variety of models. Our empirical application is instrumental variables estimation, where either one of two instrument vectors might be invalid. Keywords: Doubly Robust Estimation, Generalized Method of Moments, Instrumental Variables, Average Treatment Effects, Parametric Models Note: previously circulated as "General Doubly Robust Identification and Estimation" Classification-JEL: C51, C36, C31 Series: Boston College Working Papers in Economics Number: 1003 Creation-Date: 20191215 Revision-Date: 20220115 File-URL: http://fmwww.bc.edu/EC-P/wp1003.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:1003 Template-Type: ReDIF-Paper 1.0 Title: Identification of Semiparametric Model Coefficients, With an Application to Collective Households Author-Name: Arthur Lewbel Author-X-Name-First: Arthur Author-X-Name-Last: Lewbel Author-Person: ple43 Author-Email: lewbel@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Xirong Lin Author-X-Name-First: Xirong Author-X-Name-Last: Lin Author-Person: pli1297 Author-Email: xirong.lin@bc.edu Author-WorkPlace-Name: Shanghai University of Finance and Economics Abstract: We prove identification of coefficients for a set of semiparametric specifications that are related to multiple index models. Potential applications of these results include models of observed heterogeneity in production functions and in consumer demand systems. We then generalize these results to identify a class of collective household consumption models. We extend the existing literature by proving point identification, rather than the weaker generic identification, of all the features of the collective household model, including price effects. We estimate the model using Japanese consumption data, and find substantial variation in resource shares and indifference scales across households of different sizes. Keywords: Identification, Semiparametric, Collective Household Model, Cost of Children, Bargaining Power, Sharing Rule, Demand Systems Classification-JEL: C21, C31, D12, D13 Series: Boston College Working Papers in Economics Number: 1002 Creation-Date: 20191115 Revision-Date: 20211215 File-URL: http://fmwww.bc.edu/EC-P/wp1002.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:1002 Template-Type: ReDIF-Paper 1.0 Title: Kotlarski with a Factor Loading Author-Name: Arthur Lewbel Author-X-Name-First: Arthur Author-X-Name-Last: Lewbel Author-Person: ple43 Author-Email: lewbel@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: This note extends the Kotlarski (1967) Lemma to show exactly what is identified when we allow for an unknown factor loading on the common unobserved factor. Potential applications include measurement error models and panel data factor models. Keywords: unobserved factor, factor loading Classification-JEL: Series: Boston College Working Papers in Economics Number: 1001 Creation-Date: 20200415 Revision-Date: 20201215 File-URL: http://fmwww.bc.edu/EC-P/wp1001.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:1001 Template-Type: ReDIF-Paper 1.0 Title: Inefficient Collective Households: Cooperation and Consumption Author-Name: Arthur Lewbel Author-X-Name-First: Arthur Author-X-Name-Last: Lewbel Author-Person: ple43 Author-Email: lewbel@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Krishna Pendakur Author-X-Name-First: Krishna Author-X-Name-Last: Pendakur Author-WorkPlace-Name: Simon Fraser University Author-Person: ppe241 Abstract: We propose a model of consumption inefficiency in collective households. Inefficiency depends on a “cooperation factor”, which can also affect both the allocation of resources within a household and the utility of household members. Households are conditionally efficient, conditioning on the value of the cooperation factor. This lets us exploit convenient modeling features of efficient households (like not needing to specify the bargaining process), while still accounting for, and measuring the dollar cost of, inefficient levels of cooperation. Keywords: Collective Household Model, Inefficiency, Bargaining Power, Sharing Rule, Demand Systems, Engel Curve Classification-JEL: D13, D11, D12, C31, I32 Series: Boston College Working Papers in Economics Number: 1000 Creation-Date: 20200215 Revision-Date: 20211015 File-URL: http://fmwww.bc.edu/EC-P/wp1000.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:1000 Template-Type: ReDIF-Paper 1.0 Title: Social Influence in Legal Deliberations Author-Name: Chaim Fershtman Author-X-Name-First: Chaim Author-X-Name-Last: Fershtman Author-Workplace-Name: Tel Aviv University Author-Email: fersht@post.tau.ac.il Author-Person: pfe232 Author-Name: Uzi Segal Author-X-Name-First: Uzi Author-X-Name-Last: Segal Author-Person: pse40 Author-Email: uzi.segal@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Series: Boston College Working Papers in Economics Number: 999 Abstract: Juries, appellate courts, parole boards are all institutes that need to make collective decisions. What characterizes these institutes is that they are typ- ically engage in deliberations prior to decision making. Beyond information exchange, such deliberations also aim to affect the opinions, preferences and votes of other members. Using a model of social influence, we demonstrate how deliberation and voting procedures affect the voting outcome even when the same information is available to all. We then demonstrate the ability of a “designer” to manipulate the deliberation procedure in order to increase the probability that the outcome he favors will be selected. Note: previously circulated as "Social Influence in Committee Deliberation" Creation-Date: 20200427 Revision-Date: 20210912 Classification-JEL: D71, K40 Keywords: Committee, social influence, deliberation File-URL: http://fmwww.bc.edu/EC-P/wp999.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:999 Template-Type: ReDIF-Paper 1.0 Title: All probabilities are equal, but some probabilities are more equal than others Author-Name: Christina Letsou Author-X-Name-First: Christina Author-X-Name-Last: Letsou Author-Person: ple1083 Author-Email: letsou@bc.edu Author-WorkPlace-Name: Boston College Author-Name: Shlomo Naeh Author-X-Name-First: Shlomo Author-X-Name-Last: Naeh Author-Workplace-Name: Hebrew University of Jerusalem Author-Email: shlomo.naeh@mail.huji.ac.il Author-Name: Uzi Segal Author-X-Name-First: Uzi Author-X-Name-Last: Segal Author-Person: pse40 Author-Email: uzi.segal@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Series: Boston College Working Papers in Economics Number: 998 Abstract: A common procedure for selecting people is to have them draw balls from an urn in turn. Modern and ancient stories suggest that such lotteries may be viewed by the individuals as “unfair.” We compare this procedure with several alternatives. They all give individuals equal chance of being selected, but have different structures. We an- alyze these procedures as multistage lotteries. In line with previous literature, our analysis is based on the observation that multistage lotteries are not considered indifferent to their probabilistic one-stage representations. We use a non-expected utility model and show that individuals have preferences over the different procedures. Creation-Date: 20200428 Classification-JEL: D63 Keywords: Fair lotteries, non-expected utility, multi-stage lotteries File-URL: http://fmwww.bc.edu/EC-P/wp998.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:998 Template-Type: ReDIF-Paper 1.0 Title: Leaving No Ethical Value Behind: Triage Protocol Design for Pandemic Rationing Author-Name: Parag A. Pathak Author-X-Name-First: Parag Author-X-Name-Last: Pathak Author-Workplace-Name: MIT Author-Email: ppathak@mit.edu Author-Person: ppa503 Author-Name: Tayfun Sönmez Author-X-Name-First: Tayfun Author-X-Name-Last: Sönmez Author-Email: sonmezt@bc.edu Author-Person: psi57 Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: M. Utku Ünver Author-X-Name-First: M. Author-X-Name-Last: Ünver Author-Person: pun2 Author-Email: unver@bc.edu Author-Workplace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: M. Bumin Yenmez Author-X-Name-First: M. Bumin Author-X-Name-Last: Yenmez Author-Person: pye63 Author-Email: yenmezm@bc.edu Author-Workplace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: Rationing of medical resources is a critical issue in the COVID-19 pandemic. Most existing triage protocols are based on a priority point system, in which a formula specifies the order in which the supply of a resource, such as a ventilator, is to be rationed for patients. A priority point system generates an identical priority ranking specifying claims on all units. Triage protocols in some states (e.g. Michigan) prioritize frontline health workers giving heavier weight to the ethical principle of instrumental value. Others (e.g. New York) do not, reasoning that if frontline workers obtain high enough priority, there is a risk that they obtain all units and none remain for the general community. This debate is pressing given substantial COVID-19 health risks for frontline workers. In this paper, we analyze the consequences of rationing medical resources through a reserve system. In a reserve system, resources are placed into multiple categories. Priorities guiding allocation of units can reflect different ethical values between these categories. A reserve system provides additional flexibility over a priority point system because it does not dictate a single priority order for the allocation of all units. It offers a middle-ground approach that balances competing objectives, such as in the medical worker debate. This flexibility requires attention to implementation, especially the processing order of reserve categories. We describe our model of a reserve system, characterize its potential outcomes, and examine distributional implications of particular reserve systems. We also discuss several practical considerations with triage protocol design. Keywords: triage, protocol, ethics, ventilators, pandemic Series: Boston College Working Papers in Economics Number: 997 Creation-Date: 20200405 Revision-Date: 20200426 Note: previously circulated as "Triage Protocol Design for Ventilator Rationing in a Pandemic: A Proposal to Integrate Multiple Ethical Values through Reserves" Classification-JEL: D45, D47, D63, I18 File-URL: http://fmwww.bc.edu/EC-P/wp997.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:997 Template-Type: ReDIF-Paper 1.0 Title: Dummy Endogenous Variables in Weakly Separable Multiple Index Models without Monotonicity Author-Name: Songnian Chen Author-X-Name-First: Songnian Author-X-Name-Last: Chen Author-WorkPlace-Name: HKUST Author-Name: Shakeeb Khan Author-X-Name-First: Shakeeb Author-X-Name-Last: Khan Author-Person: phk401 Author-Email: shakeeb.khan@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Xun Tang Author-X-Name-First: Xun Author-X-Name-Last: Tang Author-WorkPlace-Name: Rice University Author-Person: pta642 Abstract: We study the identification and estimation of treatment effect parameters in weakly separable models. In their seminal work, Vytlacil and Yildiz (2007) showed how to identify and estimate the average treatment effect of a dummy endogenous variable when the outcome is weakly separable in a single index. Their identification result builds on a monotonicity condition with respect to this single index. In comparison, we consider similar weakly separable models with multiple indices, and relax the monotonicity condition for identification. Unlike Vytlacil and Yildiz (2007), we exploit the full information in the distribution of the outcome variable, instead of just its mean. Indeed, when the outcome distribution function is more informative than the mean, our method is applicable to more general settings than theirs; in particular we do not rely on their monotonicity assumption and at the same time we also allow for multiple indices. To illustrate the advantage of our approach, we provide examples of models where our approach can identify parameters of interest whereas existing methods would fail. These examples include models with multiple unobserved disturbance terms such as the Roy model and multinomial choice models with dummy endogenous variables, as well as potential outcome models with endogenous random coefficients. Our method is easy to implement and can be applied to a wide class of models. We establish standard asymptotic properties such as consistency and asymptotic normality. Classification-JEL: C14, C31, C35 Keywords: Weak Separability, Treatment Effects, Monotonicity, Endogeneity Series: Boston College Working Papers in Economics Number: 996 Creation-Date: 20200401 File-URL: http://fmwww.bc.edu/EC-P/wp996.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:996 Template-Type: ReDIF-Paper 1.0 Title: Reversing Reserves Author-Name: Parag A. Pathak Author-X-Name-First: Parag Author-X-Name-Last: Pathak Author-Workplace-Name: MIT Author-Email: ppathak@mit.edu Author-Person: ppa503 Author-Name: Alex Rees-Jones Author-X-Name-First: Alex Author-X-Name-Last: Rees-Jones Author-Workplace-Name: Cornell University Author-Email: arr34@cornell.edu Author-Person: pre490 Author-Name: Tayfun Sönmez Author-X-Name-First: Tayfun Author-X-Name-Last: Sönmez Author-Email: sonmezt@bc.edu Author-Person: psi57 Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: Affirmative action policies are often implemented through reserve systems. We contend that the functioning of these systems is counterintuitive, and that the consequent misunderstanding leads individuals to support policies that ineffectively pursue their goals. We present 1,013 participants in the Understanding America Study with incentivized choices between reserve policies that vary in all decision-relevant parameters. Many subjects’ choices are rationalized by a nearly correct decision rule, with errors driven solely by the incorrect belief that reversing the processing order has no effect. The prevalence of this belief helps to explain otherwise surprising decisions made in field applications of reserve systems. Keywords: affirmative action, reserve systems, experimental economics, behavioral market design Series: Boston College Working Papers in Economics Number: 995 Creation-Date: 20200401 Classification-JEL: C9, D9, D47 File-URL: http://fmwww.bc.edu/EC-P/wp995.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:995 Template-Type: ReDIF-Paper 1.0 Title: Estimation and Inference about Tail Features with Tail Censored Data Author-Name: Yulong Wang Author-WorkPlace-Name: Syracuse University Author-Email: ywang402@maxwell.syr.edu Author-Person: pwa955 Author-Name: Zhijie Xiao Author-Email: xiaoz@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Person: pxi26 Abstract: This paper considers estimation and inference about tail features when the observations beyond some threshold are censored. We first show that ignoring such tail censoring could lead to substantial bias and size distortion, even if the censored probability is tiny. Second, we propose a new maximum likelihood estimator (MLE) based on the Pareto tail approximation and derive its asymptotic properties. Third, we provide a small sample modification to the MLE by resorting to Extreme Value theory. The MLE with this modification delivers excellent small sample performance, as shown by Monte Carlo simulations. We illustrate its empirical relevance by estimating (i) the tail index and the extreme quantiles of the US individual earnings with the Current Population Survey dataset and (ii) the tail index of the distribution of macroeconomic disasters and the coefficient of risk aversion using the dataset collected by Barro and Ursúa (2008). Our new empirical findings are substantially different from the existing literature. Keywords: Extreme Value theory, power law, extreme quantile, tail index Classification-JEL: C4 Series: Boston College Working Papers in Economics Number: 994 Creation-Date: 20200320 File-URL: http://fmwww.bc.edu/EC-P/wp994.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:994 Template-Type: ReDIF-Paper 1.0 Title: Immigration Lottery Design: Engineered and Coincidental Consequences of H-1B Reforms Author-Name: Parag A. Pathak Author-X-Name-First: Parag Author-X-Name-Last: Pathak Author-Workplace-Name: MIT Author-Email: ppathak@mit.edu Author-Name: Alex Rees-Jones Author-X-Name-First: Alex Author-X-Name-Last: Rees-Jones Author-Workplace-Name: Cornell University Author-Email: arr34@cornell.edu Author-Name: Tayfun Sönmez Author-X-Name-First: Tayfun Author-X-Name-Last: Sönmez Author-Email: sonmezt@bc.edu Author-Person: psi57 Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: In response to increasing demand for high-skilled labor, the U.S. Congress legislated in 2005 that the H-1B visa program create 20,000 additional slots for advanced degree applicants on top of 65,000 slots open to all. Since then, the U.S. Customs and Immigration Service (USCIS) has implemented this policy through visa allocation rules that comply with this legislation. Following a directive in the April 2017 Buy American and Hire American Executive Order by President Trump, USCIS tweaked its H-1B visa allocation rule in 2019, in an explicit effort to increase the share of higher-skill beneficiaries, bypassing the need for Congressional approval to increase the number of advanced degree slots. The USCIS estimated that the rule change, engineered solely for this objective, would increase the number of higher-skill beneficiaries by more than 5,000 at the expense of lower-skill beneficiaries. In this paper, we characterize all visa allocation rules that comply with the legislation. Despite specifying rigid caps, we show that the legislation still allows for rules that can change the number of high-skill awards by as many as 14,000 in an average year. Of all rules that comply with the legislation, the 2019 rule adopted by the Trump administration produces the best possible outcome for higher-skill applicants and the worst possible outcome for lower-skill applicants. We also discover that each of the two previous and much less known changes to the H-1B visa allocation rule resulted in more substantial changes to the share of higher-skill beneficiaries than the 2019 reform. The distributional effects of these earlier reforms in 2006 and 2008, how- ever, were motivated by logistical considerations, potentially without understanding of their importance for the rate of higher-skill awards. Series: Boston College Working Papers in Economics Number: 993 Creation-Date: 20200201 Revision-Date: 20200220 Keywords: H1B, Immigration Policy, Reserve Design Classification-JEL: C78, D47 File-URL: http://fmwww.bc.edu/EC-P/wp993.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:993 Template-Type: ReDIF-Paper 1.0 Title: Anticipated Productivity and the Labor Market Author-Name: Ryan Chahrour Author-X-Name-First: Ryan Author-X-Name-Last: Chahrour Author-Person: pch1111 Author-Email: ryan.chahrour@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Sanjay Chugh Author-X-Name-First: Sanjay Author-X-Name-Last: Chugh Author-WorkPlace-Name: The Ohio State University Author-Email: chugh.14@osu.edu Author-Person: pch1272 Author-Name: Tristan Potter Author-X-Name-First: Tristan Author-X-Name-Last: Potter Author-WorkPlace-Name: Drexel University Author-Email: tristan.l.potter@drexel.edu Author-Person: ppo606 Abstract: We identify the main shock driving the covariance of the labor market and output. The shock drives strong business cycle comovement among output, consumption, investment, hours, and stock prices but is essentially orthogonal to business cycle fluctuations in TFP. Yet, the shock is associated with future persistent TFP fluctuations, consistent with theories of technology news. A standard labor search model in which wages are determined by a cash flow sharing rule, rather than the net present value of match surplus, matches the observed responses to TFP news. The response of the wage implied by this rule is consistent with the empirical responses of a broad panel of wage series. Classification-JEL: E32, E24 Keywords: News Shocks, Wages, Search and Matching, Business Cycles Series: Boston College Working Papers in Economics Number: 992 Creation-Date: 20200131 File-URL: http://fmwww.bc.edu/EC-P/wp992.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:992 Template-Type: ReDIF-Paper 1.0 Title: Franchise Contract Regulations and Local Market Structure Author-Name: Charles Murry Author-X-Name-First: Charles Author-X-Name-Last: Murry Author-Person: pmu486 Author-Workplace-Name: Department of Economics, Boston College Author-Name: Peter Newberry Author-X-Name-First: Peter Author-X-Name-Last: Newberry Author-Email: pwnewberry@psu.edu Author-WorkPlace-Name: Penn State University Abstract: Many U.S. states have regulations in place that restrict the ability of franchisors to terminate franchise contracts. We estimate the economic effects of these regulations, with a focus on how they impact market structure. Using data from the quick-service restaurant industry, we find that implementing the franchise regulation results in 4-5% fewer establishments in the average county. Our results imply franchise regulation leads to increased concentration in a large number of markets, as the number of counties in the bottom quartile of concentration would increase by between 11% and 15% with regulation. Keywords: Franchising, Entry, Regulatory Capture, Retailing Classification-JEL: L22, L26, K20 Note: previously circulated as "Local Effects of Franchise Contract Regulations" Series: Boston College Working Papers in Economics Number: 991 Creation-Date: 20200108 Revision-Date: 20210319 File-URL: http://fmwww.bc.edu/EC-P/wp991.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:991 Template-Type: ReDIF-Paper 1.0 Title: Affirmative Action with Overlapping Reserves Author-Name: Tayfun Sönmez Author-X-Name-First: Tayfun Author-X-Name-Last: Sönmez Author-Email: sonmezt@bc.edu Author-Person: psi57 Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: M. Bumin Yenmez Author-X-Name-First: M. Bumin Author-X-Name-Last: Yenmez Author-Person: pye63 Author-Workplace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: In a wide variety of real-life resource allocation problems such as school choice or assignment of public positions, implementation of affirmative action policies rely on choice rules that balance meritocracy with equity. We study choice rules where meritocracy is attained through reliance on a priority list, and equity is attained through reserved positions for target groups of disadvantaged individuals. Focusing on overlapping reserves, the case where an individual can belong to multiple types of reserved positions, we characterize choice rules that satisfy maximal compliance with reservations, elimination of justified envy, and non-wastefulness. When an individual accommodates only one of the reserved positions, the horizontal envelope choice rule is the only rule to satisfy these three axioms. When an individual accommodates each of the reserved positions she qualifies for, there are complementarities between individuals. Under this alternative convention, and assuming there are only two target groups, such as women and minorities, we show that paired-admission choice rules are the only ones to satisfy the three axioms. Building on these results, we provide improved allocation mechanisms for school choice in Chile, public position allocation in India, and college admissions in Brazil. Series: Boston College Working Papers in Economics Number: 990 Creation-Date: 20191215 Revision-Date: 20200115 Keywords: Market design, matching, affirmative action, deferred acceptance Classification-JEL: C78, D47 File-URL: http://fmwww.bc.edu/EC-P/wp990.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:990 Template-Type: ReDIF-Paper 1.0 Title: Populism, Political Risk and the Economy: Lessons from Italy Author-Name: Pierluigi Balduzzi Author-X-Name-First: Pierluigi Author-X-Name-Last: Balduzzi Author-Person: pba469 Author-WorkPlace-Name: Boston College Author-Name: Emanuele Brancati Author-X-Name-First: Emanuele Author-X-Name-Last: Brancati Author-Person: pbr559 Author-WorkPlace-Name: Sapienza University of Rome Author-Name: Marco Brianti Author-X-Name-First: Marco Author-X-Name-Last: Brianti Author-Person: pbr787 Author-WorkPlace-Name: Boston College Author-Name: Fabio Schiantarelli Author-X-Name-First: Fabio Author-X-Name-Last: Schiantarelli Author-Email: schianta@bc.edu Author-Person: psc8 Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Workplace-Name: IZA Abstract: We study the effects on financial markets and real economic activity of changes in risk related to political events and policy announcements in Italy during the 2013-2019 period that saw the rise to power of populist parties. We focus on events that have implications for budgetary policy, debt sustainability and for Euro membership. We use changes in the Credit Default Swaps (CDS) spreads on governments bonds around those dates as an instrument for shocks to policy and institutional risk – political risk for short – in the context of Local Projections - IV. We show that shocks associated with the rise of populist forces or their policies have adverse and sizable effects on financial markets. These negative effects were moderated by the European institutions and domestic constitutional constraints. In addition, Italian political developments generate international spillover effects on the spreads of other eurozone countries. Finally, political risk shocks have a negative impact on the real economy, although the accommodating stance of monetary policy helped in cushioning them. Series: Boston College Working Papers in Economics Number: 989 Creation-Date: 20191201 Revision-Date: 20200428 Keywords: populism, political risk, policy uncertainty, sovereign debt, fiscal policy, CDS spread Classification-JEL: E44, G10, H62, H63 File-URL: http://fmwww.bc.edu/EC-P/wp989.pdf File-Format: application/pdf File-Function: main text File-URL: http://fmwww.bc.edu/EC-P/wp989app.pdf File-Format: application/pdf File-Function: online appendix Handle: RePEc:boc:bocoec:989 Template-Type: ReDIF-Paper 1.0 Title: Innovation by start-up firms: The influence of the board of directors for knowledge spillovers Author-Name: Christopher F. Baum Author-X-Name-First: Christopher Author-X-Name-Last: Baum Author-Person: pba1 Author-Email: baum@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Workplace-Name: DIW Berlin Author-Workplace-Name: CESIS, KTH Royal Institute of Technology Author-Name: Hans Lööf Author-X-Name-First: Hans Author-X-Name-Last: Lööf Author-Person: plf1 Author-Workplace-Name: CESIS, KTH Royal Institute of Technology Author-Email: hans.loof@indek.kth.se Author-Name: Andreas Stephan Author-X-Name-First: Andreas Author-X-Name-Last: Stephan Author-Workplace-Name: Jönköping International Business School Author-Workplace-Name: DIW Berlin Author-Email: andreas.stephan@ju.se Author-Person: pst185 Author-Name: Ingrid Viklund-Ros Author-X-Name-First: Ingrid Author-X-Name-Last: Viklund-Ros Author-Workplace-Name: CESIS, KTH Royal Institute of Technology Abstract: The paper examines whether the innovation potential of start-ups is influenced by existing innovative firms via the board of directors. This channel of spillover is largely unexplored. Our analysis of over 370,000 firm-year observations on more than 60,000 Swedish start-up firms which entered the market between 2002 and 2013 shows a positive effect of the boards' innovation experience on the propensity to apply for patents, while no impact on trademark registration is found. The results are robust to controlling for unobserved heterogeneity as well as worker and managerial mobility, human capital, board diversity, venture capital, patent citations, firm size, region and industry. Keywords: start-ups, board of directors, knowledge spillovers, innovation, instrumental variable estimation Classification-JEL: C36, D24, M13, L21, O33 Series: Boston College Working Papers in Economics Number: 988 Note: previously circulated as "The impact of board directors on the innovation of new ventures" Publication-Status: forthcoming, Research Policy Creation-Date: 20191129 Revision-Date: 20210831 File-URL: http://fmwww.bc.edu/EC-P/wp988.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:988 Template-Type: ReDIF-Paper 1.0 Title: Sectoral Media Focus and Aggregate Fluctuations Author-Name: Ryan Chahrour Author-X-Name-First: Ryan Author-X-Name-Last: Chahrour Author-Person: pch1111 Author-Email: ryan.chahrour@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Kristoffer Nimark Author-X-Name-First: Kristoffer Author-X-Name-Last: Nimark Author-WorkPlace-Name: Cornell University Author-Email: pkn8@cornell.edu Author-Name: Stefan Pitschner Author-X-Name-First: Stefan Author-X-Name-Last: Pitschner Author-WorkPlace-Name: Uppsala University Author-Email: pitschner@gmail.com Abstract: We formalize the editorial role of news media in a multi-sector economy and show that media can be an independent source of business cycle fluctuations, even when the information they report is accurate. Our approach tightly links agents’ beliefs to real economic developments and allows for incomplete information without exogenous noise shocks. In the model, media monitor the economy, making state-dependent decisions on which subset of sectors to report. Accurate public reporting about sectoral developments that are newsworthy but unrepresentative, causes firms in all sectors to over- or underinvest in productive capacity. We construct historical time series of sectoral news coverage in the US and use them to calibrate a multi-sector model driven only by sectoral TFP shocks. Time-varying media focus generates demand-like aggregate fluctuations that are orthogonal to productivity. Presented with historical productivity shocks constructed by the BEA, the model reproduces the 2009 Great Recession. Classification-JEL: E32, D83, D84 Keywords: News media; Business Cycles; Information frictions; Sectoral linkages Series: Boston College Working Papers in Economics Number: 987 Creation-Date: 20191015 File-URL: http://fmwww.bc.edu/EC-P/wp987.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:987 Template-Type: ReDIF-Paper 1.0 Title: On Uniform Inference in Nonlinear Models with Endogeneity Author-Name: Shakeeb Khan Author-X-Name-First: Shakeeb Author-X-Name-Last: Khan Author-Person: phk401 Author-Email: shakeeb.khan@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Denis Nekipelov Author-X-Name-First: Denis Author-X-Name-Last: Nekipelov Author-WorkPlace-Name: University of Virginia Author-Person: pne42 Abstract: This paper explores the uniformity of inference for parameters of interest in nonlinear econometric models with endogeneity. Here the notion of uniformity arises because the behavior of estimators of parameters is shown to vary with where they lie in the parameter space. As a result, inference becomes nonstandard in a fashion that is loosely analogous to inference complications found in the unit root and weak instruments lit-erature, as well as the models recently studied in Andrews and Cheng (2012), Chen, Ponomareva, and Tamer (2014), Han and McCloskey (2019). Our main illustrative example is the standard sample selection model, where the parameter is the intercept term as in Heckman (1990), Andrews and Schafgans (1998) and Lewbel (2007). We show here there is a discontinuity in the limiting distribution for an estimator despite it being uniformly (across degrees of selection) consistent. This discontinuity prevents standard inference procedures from being uniformly valid, and motivates the development of new methods, for which we establish asymptotic properties. Finite sample properties of the procedure is explored through a simulation study and an empirical illustration using the Mroz (1987) data set as in Newey, Powell, and Walker (1990). Classification-JEL: C12,C13,C14,C15 Keywords:Selection on observables and unobservables, uniform inference, fixed and drifting sequences of parameters Series: Boston College Working Papers in Economics Number: 986 Creation-Date: 20190930 File-URL: http://fmwww.bc.edu/EC-P/wp986.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:986 Template-Type: ReDIF-Paper 1.0 Title: Informational Content of Factor Structures in Simultaneous Binary Response Models Author-Name: Shakeeb Khan Author-X-Name-First: Shakeeb Author-X-Name-Last: Khan Author-Person: phk401 Author-Email: shakeeb.khan@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Arnaud Maurel Author-X-Name-First: Arnaud Author-X-Name-Last: Maurel Author-WorkPlace-Name: Duke University Author-Person: pma1091 Author-Name: Yichong Zhang Author-X-Name-First: Yichong Author-X-Name-Last: Zhang Author-WorkPlace-Name: Singapore Management University Abstract: We study the informational content of factor structures in discrete triangular systems. Factor structures have been employed in a variety of settings in cross sectional and panel data models, and in this paper we formally quantify their identifying power in a bivariate system often employed in the treatment effects literature. Our main findings are that imposing a factor structure yields point identification of parameters of interest, such as the coefficient associated with the endogenous regressor in the outcome equation, under weaker assumptions than usually required in these systems. In particular, we show that an exclusion restriction, requiring an explanatory variable in the outcome equation to be excluded from the treatment equation, is no longer necessary for identification. Under such settings, we propose a rank estimator for both the factor loading and the causal effect parameter that are root-n consistent and asymptotically normal. The estimator’s finite sample properties are evaluated through a simulation study. We also establish identification results in models with more general factor structures, that are characterized by nonparametric functional forms and multiple idiosyncratic shocks. Classification-JEL: C14, C31, C35 Keywords: Factor Structures, Discrete Choice, Causal Effects Series: Boston College Working Papers in Economics Number: 985 Creation-Date: 20190915 File-URL: http://fmwww.bc.edu/EC-P/wp985.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:985 Template-Type: ReDIF-Paper 1.0 Title: Information Technology and Returns to Scale Author-Name: Danial Lashkari Author-X-Name-First: Danial Author-X-Name-Last: Lashkari Author-Email: danial.lashkari@bc.edu Author-Person: pla982 Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Arthur Bauer Author-X-Name-First: Arthur Author-X-Name-Last: Bauer Author-Workplace-Name: ENSAE-CREST Author-Email: arthur.bauer@insee.fr Author-Name: Jocelyn Boussard Author-X-Name-First: Jocelyn Author-X-Name-Last: Boussard Author-Person: pbo629 Author-Email: jocelyn.boussard@banque-france.fr Author-WorkPlace-Name: Banque de France Abstract: This paper investigates the role of IT in shaping recent trends in market concentration, factor income shares, and market competition. Relying on a novel dataset on hardware and software investments in the universe of French firms, we document a robust within-industry correlation between firm size and the intensity of IT demand. To explain this fact, we argue that the relative marginal product of IT inputs may rise with firm scale, since IT specifically helps firms deal with organizational limits to scale. We propose a general equilibrium model of industry dynamics that features firm-level production functions compatible with this mechanism. We estimate the production function and find evidence for the nonhomotheticity of IT demand and for an elasticity of substitution between IT and other inputs that falls below unity. Under the estimated model parameters, the cross-sectional predictions of the model match the observed relationship of firm size with IT intensity (positive) and labor share (negative). In addition, as a response to the fall in the relative price of IT inputs in post-1990 France, the model can explain about half of both the observed rise in market concentration and the observed market reallocations toward low-labor-share firms. Keywords: Information Technology, Labor Share, Industry Concentration, Production Function Estimation, Nonhomotheticity, Firm Heterogeneity Classification-JEL: O3, O4, E2 Series: Boston College Working Papers in Economics Number: 984 Creation-Date: 20190926 File-URL: http://fmwww.bc.edu/EC-P/wp984.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:984 Template-Type: ReDIF-Paper 1.0 Title: The intra-spousal balance of power within the family: cross-cultural evidence Author-Name: Pierre-André Chiappori Author-X-Name-First: Pierre-André Author-X-Name-Last: Chiappori Author-Workplace-Name: Columbia University Author-Name: José Alberto Molina Author-X-Name-First: José Author-X-Name-Last: Molina Author-Email: jamolina@unizar.es Author-WorkPlace-Name: Departamento de Análisis Económico, Universidad de Zaragoza Author-Person: pmo697 Abstract: This paper examines cross-cultural evidence of the intra-spousal balance of power within the family. The traditional, ‘unitary’ model of the family, which assumes that members maximize a single utility function, has increasingly been challenged in recent decades, as a consequence of a questioning of the underlying income-pooling hypothesis, through attempts to assume differential preferences of family members, with the relative power of spouses being of particular significance. These non-unitary models treat family decisions as outcomes of interactions between the spouses. We focus here on collective models, which have been most widely used for that purpose. We show international evidence on the basis of the UN Human Development Index 2018. Data results indicate that, in both developed (very high and top medium HDI) and non-developed (bottom medium and low HDI) cultural areas, non-unitary models, in which intra-spousal bargaining power plays a role, are empirically accepted. The Pareto-optimality hypothesis of collective models has been accepted for most statistical data bases. In developed cultural areas, wives, on average, control between one half and two thirds of household resources, with the highest bargaining power affecting expenditure patterns. As the bargaining power of women grows, allocations to education and school attendance also tend to grow in most countries. Keywords: Cross-Cultural; Intra-marriage; Balance of Power; Non-unitary Models; Pareto-efficiency Classification-JEL: Series: Boston College Working Papers in Economics Number: 983 Creation-Date: 20190901 File-URL: http://fmwww.bc.edu/EC-P/wp983.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:983 Template-Type: ReDIF-Paper 1.0 Title: The Impact of Post-Marital Maintenance on Dynamic Decisions and Welfare of Couples Author-Name: Hanno Foerster Author-X-Name-First: Hanno Author-X-Name-Last: Foerster Author-Email: hanno.foerster@bc.edu Author-Person: pfo326 Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: In many countries divorce law mandates post-marital maintenance payments (child support and alimony) to insure the lower earner in married couples against financial losses upon divorce. This paper studies how maintenance payments affect couples’ intertemporal decisions and welfare. I develop a dynamic model of family labor supply, housework, savings and divorce and estimate it using Danish register data. The model captures the policy trade off between providing insurance to the lower earner and enabling couples to specialize efficiently, on the one hand, and maintaining labor supply incentives for divorcees, on the other hand. I use the estimated model to analyze counterfactual policy scenarios in which child support and alimony payments are changed. The welfare maximizing maintenance policy is to triple child support payments and reduce alimony by 12.5% relative to the Danish status quo. Switching to the welfare maximizing policy makes men worse off, but comparisons to a first best scenario reveal that Pareto improvements are feasible, highlighting the limitations of maintenance policies. Classification-JEL: D10, D91, J18, J12, J22, K36 Keywords: marriage and divorce, child support, alimony, household behavior, labor supply, limited commitment Series: Boston College Working Papers in Economics Number: 982 Creation-Date: 20190913 File-URL: http://fmwww.bc.edu/EC-P/wp982.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:982 Template-Type: ReDIF-Paper 1.0 Title: Mismatch Cycles Author-Name: Isaac Baley Author-X-Name-First: Isaac Author-X-Name-Last: Bayley Author-Person: pba794 Author-Email: isaac.baley@upf.edu Author-Workplace-Name: Universitat Pompeu Fabra Author-Name: Ana Figueiredo Author-X-Name-First: Ana Author-X-Name-Last: Figueiredo Author-WorkPlace-Name: Erasmus School of Economics Author-Email: figueiredo@ese.eur.nl Author-Name: Robert Ulbricht Author-X-Name-First: Robert Author-X-Name-Last: Ulbricht Author-Person: pul38 Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: This paper studies the cyclical dynamics of skill mismatch and quantifies its impact on labor productivity. We build a tractable directed search model, in which workers differ in skills along multiple dimensions and sort into jobs with heterogeneous skill requirements. Skill mismatch arises due to information frictions and is prolonged by search frictions. Estimated to the U.S., the model replicates salient business cycle properties of mismatch. Job transitions in and out of bottom job rungs, combined with career mobility, are key to account for the empirical fit. The model provides a novel narrative for the scarring effect of unemployment. Classification-JEL: E24, E32, J24, J64 Keywords: Business cycles, cleansing, learning about skills, multidimensional sorting, scarring effect of unemployment, search-and-matching, skill mismatch, sullying Series: Boston College Working Papers in Economics Number: 981 Creation-Date: 20190821 Revision-Date: 20210804 File-URL: http://fmwww.bc.edu/EC-P/wp981.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:981 Template-Type: ReDIF-Paper 1.0 Title: Inference on Semiparametric Multinomial Response Models Author-Name: Shakeeb Khan Author-X-Name-First: Shakeeb Author-X-Name-Last: Khan Author-Person: phk401 Author-Email: shakeeb.khan@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Fu Ouyang Author-X-Name-First: Fu Author-X-Name-Last: Ouyang Author-WorkPlace-Name: University of Queensland Author-Email: mponomareva@niu.edu Author-Person: pou68 Author-Name: Elie Tamer Author-X-Name-First: Elie Author-X-Name-Last: Tamer Author-Person: pta279 Author-WorkPlace-Name: Harvard University Author-Email: elietamer@fas.harvard.edu Abstract: In this paper we explore inference on regression coefficients in semi parametric multinomial response models. We consider cross sectional, and both static and dynamic panel settings where we focus throughout on point inference under sufficient conditions for point identification. The approach to identification uses a matching insight throughout all three models and relies on variation in regressors: with cross section data, we match across individuals while with panel data we match within individuals over time. Across models, IIA is not assumed as the unobserved errors across choices are allowed to be arbitrarily correlated. For the cross sectional model estimation is based on a localized rank objective function, analogous to that used in Abrevaya, Hausman, and Khan (2010), and presents a generalization of existing approaches. In panel data settings rates of convergence are shown to exhibit a curse of dimensionality in the number of alternatives. The results for the dynamic panel data model generalizes the work of Honoré and Kyriazidou (2000) to cover the multinomial case. A simulation study establishes adequate finite sample properties of our new procedures and we apply our estimators to a scanner panel data set. Classification-JEL: C22, C23, C25 Keywords: Multinomial choice, Rank Estimation, Adaptive Inference, Dynamic Panel Data Series: Boston College Working Papers in Economics Number: 980 Creation-Date: 20190512 File-URL: http://fmwww.bc.edu/EC-P/wp980.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:980 Template-Type: ReDIF-Paper 1.0 Title: Identification of Dynamic Panel Binary Response Models Author-Name: Shakeeb Khan Author-X-Name-First: Shakeeb Author-X-Name-Last: Khan Author-Person: phk401 Author-Email: shakeeb.khan@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Maria Ponomareva Author-X-Name-First: Maria Author-X-Name-Last: Ponomareva Author-WorkPlace-Name: Northern Illinois University Author-Email: mponomareva@niu.edu Author-Person: ppo344 Author-Name: Elie Tamer Author-X-Name-First: Elie Author-X-Name-Last: Tamer Author-Person: pta279 Author-WorkPlace-Name: Harvard University Author-Email: elietamer@fas.harvard.edu Abstract: We analyze identification in dynamic econometric models of binary choice with fixed effects under general conditions. This class of models is often used in the literature to distinguish between state dependence (invariably referred to in the recent literature as switching costs, inertia or stickiness) and heterogeneity. We first characterize the sharp set for parameters in a dynamic panel of binary choice under conditional stationarity. The identified set can be characterized by a union of convex polyhedrons. We conduct the same exercise under the stronger assumption of conditional exchangeability, and establish its incremental identifying power. We extend our identification approach to study models with more time periods as well. We also provide sufficient conditions for point identification. For inference in cases with discrete regressors, we provide an approach to constructing confidence sets for the identified sets using a linear program that is simple to implement. The paper then provides simulation based evidence on the size and shape of the identified sets in varying designs to illustrate the informational content of different assumptions. We also illustrate the inference approach using a data set on women’s labor supply decisions. Classification-JEL: C22, C23, C25 Keywords: Binary Choice, Dynamic Panel Data, Partial Identification Series: Boston College Working Papers in Economics Number: 979 Creation-Date: 20190315 File-URL: http://fmwww.bc.edu/EC-P/wp979.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:979 Template-Type: ReDIF-Paper 1.0 Title: Constitutional Implementation of Vertical and Horizontal Reservations in India: A Unified Mechanism for Civil Service Allocation and College Admissions Author-Name: Tayfun Sönmez Author-X-Name-First: Tayfun Author-X-Name-Last: Sönmez Author-Email: sonmezt@bc.edu Author-Person: psi57 Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: M. Bumin Yenmez Author-X-Name-First: M. Bumin Author-X-Name-Last: Yenmez Author-Person: pye63 Author-Workplace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: In order to address the historic discrimination faced by various communities under the caste system, a comprehensive affirmative action system exists in India, reserving access to government jobs and to enrollment in higher educational institutions. While there is a Supreme Court-mandated mechanism to implement these reservations when the positions are homogeneous, no mechanism is provided when the positions are heterogeneous. This gap results in widespread adoption of unconstitutional mechanisms, countless lawsuits, regular judicial review, and inconsistent judgements including at the Supreme Court level. We identify the root cause of all these challenges, and propose a design to overcome them. Series: Boston College Working Papers in Economics Number: 978 Creation-Date: 20190415 Keywords: Market design, matching, affirmative action, deferred acceptance Classification-JEL: C78, D47 File-URL: http://fmwww.bc.edu/EC-P/wp978.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:978 Template-Type: ReDIF-Paper 1.0 Title: Affirmative Action in India via Vertical and Horizontal Reservations Author-Name: Tayfun Sönmez Author-X-Name-First: Tayfun Author-X-Name-Last: Sönmez Author-Email: sonmezt@bc.edu Author-Person: psi57 Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: M. Bumin Yenmez Author-X-Name-First: M. Bumin Author-X-Name-Last: Yenmez Author-Person: pye63 Author-Workplace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: Built into the country’s constitution, one of the world’s most comprehensive affirmative action programs exists in India. Government jobs and seats at publicly funded educational institutions are allocated through a Supreme Court-mandated procedure that integrates a meritocracy-based system with a reservation system that provides a level playing field for disadvantaged groups through two types of special provisions. The higher-level provisions, known as vertical reservations, are exclusively intended for backward classes that faced historical discrimination, and implemented on a “set aside” basis. The lower-level provisions, known as horizontal reservations, are intended for other disadvantaged groups (such as women or disabled citizens), and they are implemented on a “minimum guarantee” basis. We show that, the Supreme Court-mandated procedure suffers from two major deficiencies: Not only a candidate can lose a position to a less meritorious candidate from a higher-privilege group, completely against the philosophy of affirmative action, but she can also lose a position simply because of disclosing her disadvantaged status. This loophole under the Supreme Court-mandated procedure causes widespread confusion in India, resulting in countless lawsuits, conflicting judgements on these law- suits, and even defiance in some of its states. A recent amendment in the Constitution of India has a potential to amplify the adverse effects of these shortcomings, especially to the detriment of female candidates. We propose an alternative procedure that resolves both deficiencies with the smallest possible deviation from the Supreme Court-mandated procedure. Series: Boston College Working Papers in Economics Number: 977 Creation-Date: 20190315 Keywords: Market design, matching, affirmative action Classification-JEL: C78, D47 File-URL: http://fmwww.bc.edu/EC-P/wp977.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:977 Template-Type: ReDIF-Paper 1.0 Title: A Reconsideration of Money Growth Rules Author-Name: Michael T. Belongia Author-X-Name-First: Michael Author-X-Name-Last: Belongia Author-Workplace-Name: University of Mississippi Author-Person: pbe449 Author-Name: Peter N. Ireland Author-X-Name-First: Peter Author-X-Name-Last: Ireland Author-Person: pir1 Author-Email: peter.ireland@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: A New Keynesian model, estimated using Bayesian methods over a sample period that includes the recent episode of zero nominal interest rates, illustrates the effects of replacing the Federal Reserve's historical policy of interest rate management with one targeting money growth instead. Counterfactual simulations show that a rule for adjusting the money growth rate, modestly and gradually, in response to changes in the output gap delivers performance comparable to the estimated interest rate rule in stabilizing output and inflation. The simulations also reveal that, under the same money growth rule, the US economy would have recovered more quickly from the 2007-09 recession, with a much shorter period of exceptionally low interest rates. These results suggest that money growth rules can serve as a simple and effective alternative guide for monetary policy in the current low interest rate environment. Classification-JEL: E31, E32, E41, E47, E51, E52 Keywords: Divisia monetary aggregates, Monetary policy rules, New Keynesian models, Zero lower bound Series: Boston College Working Papers in Economics Number: 976 Creation-Date: 20190301 File-URL: http://fmwww.bc.edu/EC-P/wp976.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:976 Template-Type: ReDIF-Paper 1.0 Title: Advice on using heteroscedasticity based identification Author-Name: Christopher F. Baum Author-X-Name-First: Christopher Author-X-Name-Last: Baum Author-Person: pba1 Author-Email: baum@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Workplace-Name: DIW Berlin Author-Workplace-Name: CESIS, KTH Royal Institute of Technology Author-Name: Arthur Lewbel Author-X-Name-First: Arthur Author-X-Name-Last: Lewbel Author-Person: ple43 Author-Email: lewbel@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: Lewbel (2012) provides a heteroscedasticity based estimator for linear regression models containing an endogenous regressor when no external instruments or other such information is available. The estimator is implemented in the Stata module ivreg2h by Baum and Schaffer (2012). This note gives some advice and instructions to researchers who want to use this estimator. Keywords: instrumental variables, linear regression, endogeneity, identification, heteroscedasticity Classification-JEL: C26, C13, C87 Series: Boston College Working Papers in Economics Number: 975 Publication-Status: published, Stata Journal, 2019, 19:4, 757-767 Creation-Date: 20180212 Revision-Date: 20190617 File-URL: http://fmwww.bc.edu/EC-P/wp975.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:975 Template-Type: ReDIF-Paper 1.0 Title: Endogenous Alliances in Survival Contests Author-Name: Hideo Konishi Author-X-Name-First: Hideo Author-X-Name-Last: Konishi Author-Person: pko35 Author-Email: konishih@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Chen-Yu Pan Author-X-Name-First: Chen-Yu Author-X-Name-Last: Pan Author-Workplace-Name: National Chengchi University, Taiwan Author-Email: panwhu@126.com Series: Boston College Working Papers in Economics Number: 974 Abstract: Esteban and Sakovics (2003) showed in their three-person game that an alliance never appears in a possibly multi-stage contest game for an indivisible prize when allies’ efforts are perfectly substitutable. In this paper, we introduce allies’ effort complementarity by using a CES effort aggregator function. We consider an open-membership alliance formation game followed by two contests: the one played by alliances, and the one within the winning alliance. We show that if allies’ efforts are too substitutable or too complementary, no meaningful alliance appears in equilibrium. However, if allies’ efforts are moderately complementary to each other, then competition between two alliances is a subgame perfect equilibrium, which Pareto-dominates the equilibrium in a noalliance single-stage contest. We also show that if forming more than two alliances is supported in equilibrium, then it Pareto-dominates two alliance equilibrium. Nevertheless, the parameter space for such an allocation to be supported as an equilibrium shrinks when the number of alliances increases. Classification-JEL: D23, D72, D74 Keywords: contest, alliance, coalition formation, complementarity Creation-Date: 20190208 Revision-Date: 20210306 File-URL: http://fmwww.bc.edu/EC-P/wp974.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:974 Template-Type: ReDIF-Paper 1.0 Title: Sequential Formation of Alliances in Survival Contests Author-Name: Hideo Konishi Author-X-Name-First: Hideo Author-X-Name-Last: Konishi Author-Person: pko35 Author-Email: konishih@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Chen-Yu Pan Author-X-Name-First: Chen-Yu Author-X-Name-Last: Pan Author-Workplace-Name: National Chengchi University, Taiwan Author-Email: panwhu@126.com Series: Boston College Working Papers in Economics Number: 973 Abstract: We consider a sequential formation of alliances à la Bloch (1996) and Okada (1996) followed by a two-stage contest in which alliances first compete with each other, and then the members in the winning alliance compete again for an indivisible prize. In contrast to Konishi and Pan (2019) which adopted an open-membership game as the alliance formation process, alliances are allowed to limit their memberships (excludable alliances). We show that if members' efforts are strongly complementary to each other, there will be exactly two asymmetric alliances the larger alliance is formed first and then the rest of the players form the smaller one. This result contrasts with the one under open membership, where moderate complementarity is necessary to support a two-alliance structure. It is also in stark contrast with Bloch et al. (2006), where they show that a grand coalition is formed in the same game if the prize is divisible and a binding contract is possible to avoid further conflicts after an alliance wins the prize. Classification-JEL: D23, D72, D74 Keywords: contest, alliance, coalition formation, complementarity Creation-Date: 20190131 File-URL: http://fmwww.bc.edu/EC-P/wp973.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:973 Template-Type: ReDIF-Paper 1.0 Title: Free Trade Agreements with Environmental Standards Author-Name: Hideo Konishi Author-X-Name-First: Hideo Author-X-Name-Last: Konishi Author-Person: pko35 Author-Email: konishih@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Minoru Nakada Author-X-Name-First: Minoru Author-X-Name-Last: Nakada Author-Workplace-Name: Nogaya University Author-Email: mnakada@cc.nagoya-u.ac.jp Author-Name: Akihisa Shibata Author-X-Name-First: Akihisa Author-X-Name-Last: Shibata Author-Workplace-Name: Kyoto University Author-Email: shibata@kier.kyoto-u.ac.jp Series: Boston College Working Papers in Economics Number: 972 Abstract: In this paper, we investigate the effects of a free trade agreement (FTA) with environmental standards between Northern and Southern countries, with explicit considerations for transferring clean technology and enforcing reduced emissions. Southern producers benefit greatly by having access to a Northern market without barriers, while they are reluctant to use new high-cost, clean technology provided by the North. Thus, environmentally conscious Northern countries should design an FTA where Southern countries provide sufficient benefits for the membership while imposing tighter enforcement requirements. Since including too many Southern countries dilutes the benefits of being a member of the FTA, it is in the best interest of the North to limit the number of Southern memberships while requiring strict enforcement of emissions reduction. This may result in unequal treatment among the Southern countries. We provide a quantitative evaluation of FTA policies by using a numerical example. Classification-JEL: F18, Q54, Q55, Q56 Keywords: free trade agreement, technology standard, North-South model, environmental standard Creation-Date: 20180922 File-URL: http://fmwww.bc.edu/EC-P/wp972.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:972 Template-Type: ReDIF-Paper 1.0 Title: Infringing Use as a Path to Legal Consumption: Evidence from a Field Experiment Author-Name: Hong Luo Author-X-Name-First: Hong Author-X-Name-Last: Luo Author-Email: hluo@hbs.edu Author-WorkPlace-Name: Harvard Business School Author-Name: Julie Holland Mortimer Author-X-Name-First: Julie Author-X-Name-Last: Mortimer Author-Person: pmo678 Author-Email: julie.mortimer.2@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Series: Boston College Working Papers in Economics Number: 971 Abstract: Copyright infringement may result from frictions preventing legal consumption, but may also reveal demand. Motivated by this fact, we run a field experiment in which we contact firms that are caught infringing on expensive digital images. Emails to all firms include a link to the licensing page of the infringed image; for treated firms, we add links to a significantly cheaper licensing site. Making infringers aware of the cheaper option leads to a fourteen-fold increase in the ex-post licensing rate. Two additional experimental interventions are designed to reduce search costs for (i) price and (ii) product information. Both interventions—immediate price comparison and recommendation of images similar to those infringed—have large positive effects. Our results highlight the importance of mitigating user costs in small-value transactions. Creation-Date: 20181220 Classification-JEL: O3, O33, O34, C9, C93 Keywords: intellectual property, digital piracy, copyright, field experiment File-URL: http://fmwww.bc.edu/EC-P/wp971.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:971 Template-Type: ReDIF-Paper 1.0 Title: Interdistrict School Choice: A Theory of Student Assignment Author-Name: Isa Hafalir Author-X-Name-First: Isa Author-X-Name-Last: Hafalir Author-Person: pha1130 Author-WorkPlace-Name: University of Technology Sydney Author-Name: Fuhito Kojima Author-X-Name-First: Fuhito Author-X-Name-Last: Kojima Author-Email: fkojima@stanford.edu Author-Workplace-Name: Stanford University Author-Name: M. Bumin Yenmez Author-X-Name-First: M. Author-X-Name-Last: Yenmez Author-Person: pye63 Author-Workplace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: Interdistrict school choice programs—where a student can be assigned to a school outside of her district—are widespread in the US, yet the market-design literature has not considered such programs. We introduce a model of interdistrict school choice and present two mechanisms that produce stable or efficient assignments. We consider three cate- gories of policy goals on assignments and identify when the mechanisms can achieve them. By introducing a novel framework of interdistrict school choice, we provide a new avenue of research in market design. Series: Boston College Working Papers in Economics Number: 970 Creation-Date: 20181228 Keywords: Interdistrict school choice, student assignment, stability, efficiency. Classification-JEL: C78, D47, D78 File-URL: http://fmwww.bc.edu/EC-P/wp970.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:970 Template-Type: ReDIF-Paper 1.0 Title: Intermediaries and Product Quality in Used Car Markets Author-Name: Gary Biglaiser Author-X-Name-First: Gary Author-X-Name-Last: Biglaiser Author-Email: gbiglais@email.unc.edu Author-WorkPlace-Name: University of North Carolina at Chapel Hill Author-Name: Fei Li Author-X-Name-First: Fei Author-X-Name-Last: Li Author-Workplace-Name: University of North Carolina at Chapel Hill Author-Email: lifei@email.unc.edu Author-Name: Charles Murry Author-X-Name-First: Charles Author-X-Name-Last: Murry Author-Person: pmu486 Author-Workplace-Name: Department of Economics, Boston College Author-Email: murryc@bc.edu Author-Name: Yiyi Zhou Author-X-Name-First: Yiyi Author-X-Name-Last: Zhou Author-Workplace-Name: Stony Brook University Author-Email: yiyi.zhou@stonybrook.edu Abstract: We examine used car dealers’ roles as intermediaries. We present empirical evidence supporting that cars sold by dealers have higher quality: (1) dealer transaction prices are higher than private market prices and this dealer premium increases in the age of the car as a ratio and is hump-shaped in dollar value, and (2) used cars purchased from dealers are less likely to be resold immediately. We formalize a model to show that these empirical facts can be rationalized either when dealers serve to alleviate information asymmetry between sellers and buyers or when dealers facilitate assortative matching between heterogenous-quality cars and heterogeneous consumers. Lastly, based on predictions of the model, we use the data to distinguish these two theories and find evidence for both, but the preponderance of the evidence supports the asymmetric information theory. Keywords: Adverse Selection, Sorting, Search Frictions, Car Dealer, Used Car, Intermediary, Middlemen Classification-JEL: D82, D83, L15, L62 Series: Boston College Working Papers in Economics Number: 969 Creation-Date: 20181207 File-URL: http://fmwww.bc.edu/EC-P/wp969.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:969 Template-Type: ReDIF-Paper 1.0 Title: Price Discrimination in International Airline Markets Author-Name: Gaurab Aryal Author-X-Name-First: Gaurab Author-X-Name-Last: Aryal Author-Email: aryalg@virginia.edu Author-WorkPlace-Name: Department of Economics, University of Virginia Author-Name: Charles Murry Author-X-Name-First: Charles Author-X-Name-Last: Murry Author-Person: pmu486 Author-Workplace-Name: Department of Economics, Boston College Author-Email: murryc@bc.edu Author-Name: Jonathan W. Williams Author-X-Name-First: Jonathan Author-X-Name-Last: Williams Author-Workplace-Name: Department of Economics, University of North Carolina - Chapel Hill Author-Email: jonwms@unc.edu Abstract: We develop a model of inter-temporal and intra-temporal price discrimination by airlines to study the ability of different discriminatory mechanisms to remove sources of inefficiency and the associated distributional implications. To estimate the model’s multi-dimensional distribution of preference heterogeneity, we use unique data from international airline markets with flight-level variation in prices across time and cabins, and information on passengers’ reason for travel. We find that current pricing practices grant late-arriving business passengers substantial informational rents and yield 81% of first-best welfare, with stochastic demand and asymmetric information accounting for 65% and 35% of the gap, respectively. Keywords: dynamic pricing, screening, perishable goods Classification-JEL: L00, D42, L93 Series: Boston College Working Papers in Economics Number: 968 Creation-Date: 20181126 File-URL: http://fmwww.bc.edu/EC-P/wp968.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:968 Template-Type: ReDIF-Paper 1.0 Title: Daily feelings of US workers and commuting time Author-Name: J. Ignacio Gimenez-Nadal Author-X-Name-First: Ignacio Author-X-Name-Last: Gimenez-Nadal Author-Workplace-Name: Universidad de Zaragoza Author-Name: José Alberto Molina Author-X-Name-First: José Author-X-Name-Last: Molina Author-Email: jamolina@unizar.es Author-WorkPlace-Name: Departamento de Análisis Económico, Universidad de Zaragoza Author-Person: pmo697 Abstract: Millions of individuals commute every day in the US. Despite commuting has been shown to have negative consequences for workers, no evidence has been about how commuting is related to feelings in other episodes. We analyzed the relationship between the feelings reported by American workers throughout the day and the time devoted to commuting. Methods: We used the Well-Being Module of the American Time Use Survey for the years 2010, 2012, and 2013, and analized the relationship between commuting duration and the feelings reported (e.g,. happiness, sadness, stress, fatigue and pain) in both commuting and non-commuting episodes. Results: We found that more time spent on the daily commute was related to higher levels of fatigue and stress during commuting, while also being associated with higher levels of sadness and fatigue during activities of child care. In particular, we found that a 1% increase in the time devoted to commuting during the episode was related to increases of 12 percent and 13 percent of a standard deviation for stress and fatigue, while a 1% increase in the time devoted to commuting during the day was related to increases of 5 percent and 7 percent of one standard deviation in the levels of sadness and stress during child care activities. Conclusions: Our results indicated that longer commutes may be related to higher levels of stress and fatigue of workers, which may in turn affect the quality of the time parents devote to caring for their children. Keywords: Commuting, American Time Use Survey, Stress, Fatigue Classification-JEL: R41, I31, J22 Series: Boston College Working Papers in Economics Number: 967 Creation-Date: 20181117 File-URL: http://fmwww.bc.edu/EC-P/wp967.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:967 Template-Type: ReDIF-Paper 1.0 Title: The Nobel Prize in Economics: individual or collective merits? Author-Name: José Alberto Molina Author-X-Name-First: José Author-X-Name-Last: Molina Author-Email: jamolina@unizar.es Author-WorkPlace-Name: Departamento de Análisis Económico, Universidad de Zaragoza Author-Person: pmo697 Author-Name: David Iñiguez Author-X-Name-First: David Author-X-Name-Last: Iñiguez Author-Workplace-Name: Fundación ARAID, Diputación General de Aragón Author-Name: Gonzalo Ruiz Author-X-Name-First: Gonzalo Author-X-Name-Last: Ruiz Author-Workplace-Name: Instituto de Biocomputación y Física de Sistemas Complejos (BIFI), Zaragoza Author-Name: Alfonso Tarancón Author-X-Name-First: Alfonso Author-X-Name-Last: Tarancón Author-Workplace-Name: Departamento de Física Teórica, Universidad de Zaragoza Abstract: We analyse the research production of Nobel laureates in Economics, employing the JCR Impact Factor (IF) of their publications. We associate this production indicator with the level of collaboration established with other authors, using Complex Networks techniques applied to the co-authorship networks. We study both individual and collaborative behaviours, and how the professional output, in terms of publications, is related to the Nobel Prize. The study encompasses a total of 2,150 papers published between 1935 and the end of 2015 by the laureates in Economics awarded between 1969 and 2016. Our results indicate that direct collaborations among laureates are, in general, rare, but when we add all the co-authors of the laureates, the network becomes more dense, and appears as a giant component containing 70% of the nodes, which means that more than two thirds of the laureates can be connected through only two steps. We have been able to measure that, in general, a higher level of collaboration leads to a larger production. Finally, when looking at the evolution of the research output of the laureates, we find that, for most of those awarded up to the mid-1990s, the production is more stable, with a gradual decrease after the awarding of the Prize, and those awarded later experience a sharp growth in the IF before the Prize, a decrease during the years immediately following, and a new increase afterwards, returning to high levels of impact. Keywords: Nobel prize, Economics, research productivity, coauthorship, networks Classification-JEL: C45, D85, A11 Series: Boston College Working Papers in Economics Number: 966 Creation-Date: 20181020 File-URL: http://fmwww.bc.edu/EC-P/wp966.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:966 Template-Type: ReDIF-Paper 1.0 Title: Migrant STEM Entrepreneurs Author-Name: Christopher F. Baum Author-X-Name-First: Christopher Author-X-Name-Last: Baum Author-Person: pba1 Author-Email: baum@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Workplace-Name: DIW Berlin Author-Workplace-Name: CESIS, KTH Royal Institute of Technology Author-Name: Linda Dastory Author-X-Name-First: Linda Author-X-Name-Last: Dastory Author-Workplace-Name: CESIS, KTH Royal Institute of Technology Author-Name: Hans Lööf Author-X-Name-First: Hans Author-X-Name-Last: Lööf Author-Person: plf1 Author-Workplace-Name: CESIS, KTH Royal Institute of Technology Author-Email: hans.loof@indek.kth.se Author-Name: Andreas Stephan Author-X-Name-First: Andreas Author-X-Name-Last: Stephan Author-Workplace-Name: Jönköping International Business School Author-Workplace-Name: DIW Berlin Author-Email: andreas.stephan@ju.se Author-Person: pst185 Abstract: STEM workers are considered to be key drivers for economic growth in the developed world. Migrant workers play an increasing role in the supply of this occupational category. We study the universe of STEM workers in the Swedish economy over the period 2003-2015 and find that migrants are less likely to form their own business, but those who are entrepreneurs earn income at least as large as that of their native-born counterparts. While the income differential for labor migrants may be partially explained by self-selection, the estimated effect is not significantly different between natives and refugee migrants. Keywords: STEM, migration, entrepreneurship, income, panel data Classification-JEL: F22, L26, J44, J61, O14 Series: Boston College Working Papers in Economics Number: 965 Creation-Date: 20181023 File-URL: http://fmwww.bc.edu/EC-P/wp965.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:965 Template-Type: ReDIF-Paper 1.0 Title: Intransitivity in the Small and in the Large Author-Name: Sushil Bikhchandani Author-X-Name-First: Sushil Author-X-Name-Last: Bikhchandani Author-Workplace-Name: UCLA Anderson School of Management Author-Person: pbi114 Author-Email: sbikhcha@anderson.ucla.edu Author-Name: Uzi Segal Author-X-Name-First: Uzi Author-X-Name-Last: Segal Author-Person: pse40 Author-Email: uzi.segal@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Series: Boston College Working Papers in Economics Number: 964 Abstract: We propose a model of local-regret behavior that allows the separation of regret behavior between random variables that are close to each other and between random variables that are far apart. This enables a reinterpretation of evidence related to intransitive behavior in the laboratory. When viewed through this paper’s analysis of regret, the laboratory evidence need not imply intransitive behavior for large risky decisions such as investment choices and insurance. Creation-Date: 20181015 Revision-Date: 20210429 Classification-JEL: D81 Keywords: Regret, intransitivity, local preferences, preference reversal Note: previously circulated as "Regret in the Small and in the Large" File-URL: http://fmwww.bc.edu/EC-P/wp964.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:964 Template-Type: ReDIF-Paper 1.0 Title: Estimating the wage premia of refugee immigrants: Lessons from Sweden Author-Name: Christopher F. Baum Author-X-Name-First: Christopher Author-X-Name-Last: Baum Author-Person: pba1 Author-Email: baum@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Workplace-Name: CESIS, KTH Royal Institute of Technology Author-Name: Hans Lööf Author-X-Name-First: Hans Author-X-Name-Last: Lööf Author-Person: plf1 Author-Workplace-Name: CESIS, KTH Royal Institute of Technology Author-Email: hans.loof@indek.kth.se Author-Name: Andreas Stephan Author-X-Name-First: Andreas Author-X-Name-Last: Stephan Author-Workplace-Name: Linnaeus University Author-Workplace-Name: DIW Berlin Author-Email: Andreas.Stephan@lnu.se Author-Person: pst185 Author-Name: Klaus F. Zimmermann Author-X-Name-First: Klaus Author-X-Name-Last: Zimmermann Author-Workplace-Name: UNU-MERIT Author-Workplace-Name: Maastricht University Author-Workplace-Name: CEPR Author-Workplace-Name: GLO Author-Email: klaus.f.zimmermann@gmail.com Author-Person: pzi13 Abstract: This paper examines the wage earnings of fully-employed refugee immigrants in Sweden. Using administrative employer-employee data from 1990 onward, approximately 100,000 refugee immigrants who arrived between 1980 and 1996 and were granted asylum are compared to a matched sample of native-born workers. Employing recentered influence function (RIF) quantile regressions to wage earnings for the period 2011–2015, the occupational task-based Oaxaca–Blinder decomposition approach shows that refugees perform better than natives at the median wage, controlling for individual and firm characteristics. This overperformance is due to female refugee immigrants. Given their characteristics, refugee immigrant females perform better than native females across all occupational tasks studied, including non-routine cognitive tasks. A notable similarity of the wage premium exists among various refugee groups, suggesting that cultural differences and the length of time spent in the host country do not have a major ipract. Keywords: refugees, wage earnings gap, occupational sorting, employer-employee data, correlated random effects model, Blinder–Oaxaca decomposition Note: Previously circulated as "Productivity of refugee workers and implications for innovation and growth" Publication-Status: forthcoming, Industrial and Labor Relations Review Classification-JEL: C23, F22, J24, J6, O15 Series: Boston College Working Papers in Economics Number: 963 Creation-Date: 20181010 Revision-Date: 20240529 File-URL: http://fmwww.bc.edu/EC-P/wp963.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:963 Template-Type: ReDIF-Paper 1.0 Title: The contribution of foreign-born STEM workers to the knowledge-intensive economy: Evidence from Sweden Author-Name: Christopher F. Baum Author-X-Name-First: Christopher Author-X-Name-Last: Baum Author-Person: pba1 Author-Email: baum@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Workplace-Name: DIW Berlin Author-Workplace-Name: CESIS, KTH Royal Institute of Technology Author-Name: Hans Lööf Author-X-Name-First: Hans Author-X-Name-Last: Lööf Author-Person: plf1 Author-Workplace-Name: CESIS, KTH Royal Institute of Technology Author-Email: hans.loof@indek.kth.se Author-Name: Andreas Stephan Author-X-Name-First: Andreas Author-X-Name-Last: Stephan Author-Workplace-Name: Linnaeus University Author-Workplace-Name: DIW Berlin Author-Email: Andreas.Stephan@lnu.se Author-Person: pst185 Abstract: This paper investigates how foreign-born STEM workers contribute to the supply of skills in a knowledge-intensive economy. Based on Swedish employer-employee data for the period 2011–2015, we first demonstrate that both economic and refugee-immigrants are less likely to be employed in most but not all STEM-occupations compared to matched native worker. Using wage as a proxy for performance, we then consider employed work- ers and find that both categories of immigrants have higher average wages than comparable natives in STEM-core occupations, economic immigrants have higher average wages in STEM- professional occupations, and refugee- immigrants have higher average wages in the other STEM occupations. These wage differences tend to diminish but not disappear along the wage distribution. The only statistically significant reverse wage gap is found in the upper part of the wage distribution among STEM-professionals, where native workers earn more than workers with a refugee background. Keywords: STEM; migration; employment; wages; coarsened exact matching; panel probit Classification-JEL: C23; J24; J61; O14; O15 Note: Previously circulated as "Economic impact of STEM immigrant workers" Series: Boston College Working Papers in Economics Number: 962 Creation-Date: 20181004 Revision-Date: 20240211 File-URL: http://fmwww.bc.edu/EC-P/wp962.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:962 Template-Type: ReDIF-Paper 1.0 Title: The Economic Consequences of Family Policies: Lessons from a Century of Legislation in High-Income Countries Author-Name: Claudia Olivetti Author-X-Name-First: Claudia Author-X-Name-Last: Olivetti Author-Person: pol63 Author-Email: claudia.olivetti@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-WorkPlace-Name: NBER Author-Name: Barbara Petrongolo Author-X-Name-First: Barbara Author-X-Name-Last: Petrongolo Author-WorkPlace-Name: Queen Mary University Author-WorkPlace-Name: Centre for Economic Performance, LSE Author-Person: ppe484 Abstract: We draw lessons from existing work and our own analysis on the effects of parental leave and other interventions aimed at aiding families. The outcomes of interest are female employment, gender gaps in earnings and fertility. We begin with a discussion of the historical introduction of family policies ever since the end of the nineteenth century and then turn to the details regarding family policies currently in effect across high-income nations. We sketch a framework concerning the effects of family policy to motivate our country- and micro-level evidence on the impact of family policies on gender outcomes. Most estimates of the impact of parental leave entitlement on female labor market outcomes range from negligible to weakly positive. The verdict is far more positive for the beneficial impact of spending on early education and childcare. Classification-JEL: J13; J16; J18 Keywords: parental leave, childcare, family policies, gender gaps Series: Boston College Working Papers in Economics Number: 961 Creation-Date: 20160930 Publication-Status: published, Journal of Economic Perspectives, 2017, 31:1, 205-230 File-URL: http://fmwww.bc.edu/EC-P/wp961.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:961 Template-Type: ReDIF-Paper 1.0 Title: Transboundary Pollution in Southeast Asia: Welfare and Avoidance Costs in Singapore from the Forest Burning in Indonesia Author-Name: Tamara L. Sheldon Author-X-Name-First: Tamara Author-X-Name-Last: Sheldon Author-Workplace-Name: University of South Carolina Author-Email: Tamara.Sheldon@moore.sc.edu Author-Name: Chandini Sankaran Author-X-Name-First: Chandini Author-X-Name-Last: Sankaran Author-Person: psa1528 Author-Email: Chandini.Sankaran@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: Forest burning in Indonesia results in severe episodes of “seasonal haze” in neighboring Singapore. We offer the first causal analysis of the transboundary health effects of the Indonesian forest burning. Using a two-stage approach and instrumenting for air pollution with satellite fire data, we estimate the impacts of the Indonesian fires on Singaporean polyclinic attendances for acute upper respiratory tract infections and acute conjunctivitis. We also estimate the change in electricity demand in Singapore attributable to the fires, finding that demand increases as people respond to haze episodes by staying indoors. We estimate partial health and avoidance costs of US$333 million from January 2010 to June 2016. Our estimates suggest avoidance behavior is significant, accounting for over three quarters of our estimate. Classification-JEL: D62, I1, Q23, Q51, Q53 Keywords: air pollution; health; avoidance behavior; externalities; forestry Series: Boston College Working Papers in Economics Number: 960 Creation-Date: 20161205 File-URL: http://fmwww.bc.edu/EC-P/wp960.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:960 Template-Type: ReDIF-Paper 1.0 Title: LATE with Missing or Mismeasured Treatment Author-Name: Rossella Calvi Author-X-Name-First: Rossella Author-X-Name-Last: Calvi Author-WorkPlace-Name: Rice University Author-Person: pca1126 Author-Name: Arthur Lewbel Author-X-Name-First: Arthur Author-X-Name-Last: Lewbel Author-Person: ple43 Author-Email: lewbel@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Denni Tommasi Author-X-Name-First: Denni Author-X-Name-Last: Tommasi Author-WorkPlace-Name: Monash University Author-Email: denni.tommasi@monash.edu Author-Person: pto487 Abstract: We provide a new estimator, MR-LATE, that consistently estimates local average treatment effects when treatment is missing for some observations, not at random. If instead treatment is mismeasured for some observations, MR-LATE usually has less bias than the standard LATE estimator. We discuss potential applications where an endogenous binary treatment may be unobserved or mismeasured. We apply MR-LATE to study the impact of women’s control over household resources on health outcomes in Indian families. This application illustrates the use of MR-LATE when treatment is estimated rather than observed. In these situations, treatment mismeasurement may arise from model misspecification and estimation errors. Keywords: LATE, missing treatment, measurement error, misclassification, collective model, resource shares, health Classification-JEL: D13, D11, D12, C31, I32 Note: previously circulated as "Women’s Empowerment and Family Health: Estimating LATE with Mismeasured Treatment" Series: Boston College Working Papers in Economics Number: 959 Creation-Date: 20180530 Revision-Date: 20210815 File-URL: http://fmwww.bc.edu/EC-P/wp959.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:959 Template-Type: ReDIF-Paper 1.0 Title: Consumption Peer Effects and Utility Needs in India Author-Name: Arthur Lewbel Author-X-Name-First: Arthur Author-X-Name-Last: Lewbel Author-Person: ple43 Author-Email: lewbel@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Samuel Norris Author-X-Name-First: Samuel Author-X-Name-Last: Norris Author-WorkPlace-Name: University of Chicago Author-Name: Krishna Pendakur Author-X-Name-First: Krishna Author-X-Name-Last: Pendakur Author-WorkPlace-Name: Simon Fraser University Author-Person: ppe241 Author-Name: Xi Qu Author-X-Name-First: Xi Author-X-Name-Last: Qu Author-WorkPlace-Name: Shanghai Jiao Tong University Abstract: We construct a peer effects model where mean expenditures of consumers in one’s peer group affect utility through perceived consumption needs. We provide a novel method for obtaining identification in social interactions models like ours, using ordinary survey data, where very few members of each peer group are observed. We implement the model using standard household-level consumer expenditure survey microdata from India. We find that each additional rupee spent by one’s peers increases perceived needs, and thereby reduces one’s utility, by the equivalent of a 0.25 rupee decrease in one’s own expenditures. These peer costs may be larger for richer households, meaning transfers from rich to poor could improve even inequality-neutral social welfare, by reducing peer consumption externalities. We show welfare gains of billions of dollars per year might be possible by replacing government transfers of private goods to households with providing public goods or services, to reduce peer effects. Keywords: Peer Effects, Utility, Consumption, India Classification-JEL: D1, C3 Series: Boston College Working Papers in Economics Number: 958 Creation-Date: 20180815 Revision-Date: 20210915 File-URL: http://fmwww.bc.edu/EC-P/wp958.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:958 Template-Type: ReDIF-Paper 1.0 Title: The Identification Zoo - Meanings of Identification in Econometrics Author-Name: Arthur Lewbel Author-X-Name-First: Arthur Author-X-Name-Last: Lewbel Author-Person: ple43 Author-Email: lewbel@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: Over two dozen different terms for identification appear in the econometrics literature, including set identification, causal identification, local identification, generic identification, weak identification, identification at infinity, and many more. This survey: 1. gives a new framework unifying existing definitions of point identification, 2. summarizes and compares the zooful of different terms associated with identification that appear in the literature, and 3. discusses concepts closely related to identification, such as normalizations and the differences in identification between structural models and causal, reduced form models. Keywords: Identification, Econometrics, Coherence, Completeness, Randomization, Causal inference, Reduced Form Models, Instrumental Variables, Structural Models, Observational Equivalence, Normalizations, Nonparametrics, Semiparametrics Classification-JEL: C10, B16 Publication-Status: published, Journal of Economic Literature, 57:4, 2019 Series: Boston College Working Papers in Economics Number: 957 Creation-Date: 20180901 Revision-Date: 20191214 File-URL: http://fmwww.bc.edu/EC-P/wp957.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:957 Template-Type: ReDIF-Paper 1.0 Title: Early Intervention in College Classes and Improved Student Outcomes Author-Name: John Gordanier Author-X-Name-First: John Author-X-Name-Last: Gordanier Author-Workplace-Name: University of South Carolina Author-Email: jgordanier@moore.sc.edu Author-Name: William Hauk Author-X-Name-First: William Author-X-Name-Last: Hauk Author-Workplace-Name: University of South Carolina Author-Email: hauk@moore.sc.edu Author-Person: pha466 Author-Name:Chandini Sankaran Author-X-Name-First: Chandini Author-X-Name-Last: Sankaran Author-Person: psa1528 Author-Email: Chandini.Sankaran@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: This research investigates the effectiveness of an early academic intervention in Principles of Economics courses at a large public university. After the end of the fourth week of classes, students who fell below a 70% threshold on a performance measure, or had an attendance rate below 75%, were referred to the university’s Student Success Center for additional academic support. A referral consisted of students being given optional assistance in course specific skills through tutoring, as well as training in general skills like time management and study skills. Using a regression discontinuity framework at the referral threshold, we find that the performance intervention improved student scores on common questions on the final exam by 6.5 to 7.5 percentage points for students at or near the performance threshold. The gains are particularly large for students who entered college with below average math placement scores. These results indicate that low-cost light-touch interventions may significantly affect student academic performance. Classification-JEL: A2, I2 Keywords: college education, student academic performance, intervention, economic education Series: Boston College Working Papers in Economics Number: 956 Creation-Date: 20180901 File-URL: http://fmwww.bc.edu/EC-P/wp956.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:956 Template-Type: ReDIF-Paper 1.0 Title: Monetary Policy Lessons from the Greenbook Author-Name: Michael T. Belongia Author-X-Name-First: Michael Author-X-Name-Last: Belongia Author-Workplace-Name: University of Mississippi Author-Name: Peter N. Ireland Author-X-Name-First: Peter Author-X-Name-Last: Ireland Author-Person: pir1 Author-Email: peter.ireland@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: From 1987 through 2012, the Federal Open Market Committee appears to have set its federal funds rate target with reference to Greenbook forecasts of the output gap and inflation and to have made further adjustments to the funds rate as those forecasts were revised. If viewed in the context of the Taylor (1993) Rule, discretionary departures from the settings prescribed by a Greenbook forecast-based version of the rule consistently presage business cycle turning points. Similarly, estimates from an interest rate rule with time-varying parameters imply that, around such turning points, the FOMC responds less vigorously to information contained in Greenbook forecasts about the changing state of the economy. These results suggest possible gains from closer adherence to a rule with constant parameters. Other statistical properties of Greenbook forecasts also point to an overlooked role for monetary aggregates, particularly Divisia monetary aggregates, in the Federal Reserve's forecasting process and subsequent monetary policy decisions made by the FOMC. Classification-JEL: E31, E32, E37, E43, E47, E51, E52, E58, E65 Keywords: Greenbook forecasts, Taylor Rule, Time-varying parameters, Divisia monetary aggregates Series: Boston College Working Papers in Economics Number: 955 Creation-Date: 20180701 File-URL: http://fmwww.bc.edu/EC-P/wp955.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:955 Template-Type: ReDIF-Paper 1.0 Title: A Lot of Ambiguity Author-Name: Zvi Safra Author-X-Name-First: Zvi Author-X-Name-Last: Safra Author-Workplace-Name: Warwick Business School Author-Workplace-Name: Tel Aviv University Author-Name: Uzi Segal Author-X-Name-First: Uzi Author-X-Name-Last: Segal Author-Person: pse40 Author-Email: uzi.segal@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Series: Boston College Working Papers in Economics Number: 954 Abstract: We consider a risk averse decision maker who dislikes ambiguity as in the Ellsberg urns and compare the certainty equivalent of this gamble with the certainty equivalent of the anchoring probabilistic lottery. We deal first with the Choquet EU model and show that un- der some conditions on the capacity nu, when independent ambiguous gambles are repeated and the expected value of the anchoring lot- tery is zero, the difference between the average ambiguous and risky certainty equivalents converges to zero. When the parallel expected value is positive, we show that if the average certainty equivalent of the risky lottery is non-negative, then so is the limit of the average value for the ambiguous model. These results do not extend to the maxmin model or to the smooth recursive model. Creation-Date: 20180615 Revision-Date: 20200331 Classification-JEL: D81 Keywords: Ellsberg urns, repeated ambiguity, repeated risk, Choquet expected utility, maxmin File-URL: http://fmwww.bc.edu/EC-P/wp954.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:954 Template-Type: ReDIF-Paper 1.0 Title: Leverage effects and stochastic volatility in spot oil returns: A Bayesian approach with VaR and CVaR applications Author-Name: Liyuan Chen Author-X-Name-First: Liyuan Author-X-Name-Last: Chen Author-Workplace-Name: University of York Author-Email: lc844@york.ac.uk Author-Name: Paola Zerilli Author-X-Name-First: Paola Author-X-Name-Last: Zerilli Author-Person: pze62 Author-Workplace-Name: University of York Author-Email: paola.zerilli@york.ac.uk Author-Name: Christopher F Baum Author-X-Name-First: Christopher Author-X-Name-Last: Baum Author-Person: pba1 Author-Email: baum@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Workplace-Name: German Institute for Economic Research (DIW Berlin) Abstract: The crude oil markets have been quite volatile and risky in the past few decades due to the large fluctuations of oil prices. We contribute to the current debate by testing for the existence of the leverage effect when considering daily spot returns in the WTI and Brent crude oil markets and by studying the direct impact of the leverage effect on measures of risk such as VaR and CVaR. More specifically, we model spot crude oil returns using Stochastic Volatility (SV) models with various distributions of the errors. We find that the introduction of the leverage effect in the traditional SV model with Normally distributed errors is capable of adequately estimating risk for conservative oil suppliers in both the WTI and Brent markets while it tends to overestimate risk for more speculative oil suppliers. Our results also show that the choice of financial regulators, both on the supply and on the demand side, would not be affected by the introduction of leverage. Focusing instead on firm’s internal risk management, our results show that the introduction of leverage would be useful for firms who are on the demand side for oil, who use VaR for risk management and who are particularly worried about the magnitude of the losses exceeding VaR while wanting to minimize the opportunity cost of capital. Using the same logic, firms who are on the supply side would be better off not considering the leverage effect. Keywords: Value-at-Risk, Conditional Value-at-Risk, Asymmetric Laplace distribution, Stochastic volatility model, Bayesian Markov Chain Monte Carlo, leverage effect Classification-JEL: C11, C58, G17, G32 Series: Boston College Working Papers in Economics Number: 953 Creation-Date: 20180128 File-URL: http://fmwww.bc.edu/EC-P/wp953.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:953 Template-Type: ReDIF-Paper 1.0 Title: Stochastic volatility, jumps and leverage in energy and stock markets: evidence from high frequency data Author-Name: Christopher F Baum Author-X-Name-First: Christopher Author-X-Name-Last: Baum Author-Person: pba1 Author-Email: baum@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Workplace-Name: German Institute for Economic Research (DIW Berlin) Author-Workplace-Name: CESIS, Royal Institute of Technology, Stockholm Author-Name: Paola Zerilli Author-X-Name-First: Paola Author-X-Name-Last: Zerilli Author-Person: pze62 Author-Workplace-Name: University of York Author-Email: paola.zerilli@york.ac.uk Author-Name: Liyuan Chen Author-X-Name-First: Liyuan Author-X-Name-Last: Chen Author-Workplace-Name: University of York Author-Email: lc844@york.ac.uk Abstract: In this paper, we propose a model for futures returns that has the potential to provide both individual investors and firms who have positions in financial and energy commodity futures a valid tail risk management tool. In doing so, we also aim to explore the commonalities between these markets and the degree of financialization of energy commodities. Unlike most of the existing studies in energy derivative markets based on daily data, our empirical analysis makes use of high-frequency (tick-by-tick) data from the futures markets, aggregated to 10-minute intervals during the trading day. The intraday variation is then utilized to generate daily time series of prices, returns and realized variance. We estimate stochastic volatility models using a GMM approach based on the moment conditions of the Integrated Volatility derived from high frequency data. While existing empirical studies in energy markets embed either leverage or jumps in the futures return dynamics, we show that the introduction of both features improves the ability to forecast volatility as an indicator for risk for both the S&P500 and natural gas futures markets using both the RMSE and MAE criteria. Our analysis also shows that overall, the introduction of both leverage and jumps in the SVJL model provides the best forecast for risk in both a VaR and a CVaR sense for investors who have any position in natural gas futures regardless of their degree of risk aversion. In the S&P500 market, the SVJL model provides the most precise forecast of risk in a CVaR sense for risk-averse investors with any position in futures, regardless of their degree of risk aversion. Focusing on a firm's internal risk management, the introduction of both jumps and leverage in the SVJL model would benefit speculative firms who are short natural gas futures aiming at minimizing tail risk in a VaR sense, as well as speculative firms who are long S&P500 futures and use either VaR or CVaR as financial risk management criteria while wanting to minimize the opportunity cost of capital. Keywords: stochastic volatility, leverage effect, energy markets, high frequency data, VaR, CVaR Classification-JEL: C53, C58, G17, G32, Q41, Q47 Series: Boston College Working Papers in Economics Number: 952 Creation-Date: 20180615 Revision-Date: 20190529 File-URL: http://fmwww.bc.edu/EC-P/wp952.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:952 Template-Type: ReDIF-Paper 1.0 Title: Efficient and Incentive-Compatible Liver Exchange Author-Name: Haluk Ergin Author-X-Name-First: Haluk Author-X-Name-Last: Ergin Author-Email: hie@berkeley.edu Author-WorkPlace-Name: Department of Economics, University of California at Berkeley Author-Name: Tayfun Sönmez Author-X-Name-First: Tayfun Author-X-Name-Last: Sönmez Author-Email: sonmezt@bc.edu Author-Person: psi57 Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: M. Utku Ünver Author-X-Name-First: M. Author-X-Name-Last: Ünver Author-Person: pun2 Author-Workplace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: Liver exchange has been practiced in small numbers, mainly to overcome blood-type incompatibility between patients and their living donors. A donor can donate either his smaller left lobe or the larger right lobe, although the former option is safer. Despite its elevated risk, right-lobe transplantation is often utilized due to size-compatibility requirement with the patient. We model liver exchange as a market-design problem, focusing on logistically simpler two-way exchanges. First, with two patient-donor sizes, we introduce an algorithm when only the safer left-lobe transplantation is feasible. We then introduce an individually rational, Pareto-efficient, and incentive-compatible mechanism that truthfully elicits the right-lobe-donation willingness of donors, and finally extend these results to a general model with any number of patient/donor sizes. The generalization requires new technical tools regarding bilateral exchanges under partial-order-induced preferences. Through simulations we show that not only liver exchange can increase the number of transplants by more than 30%, it can also increase the share of the safer left-lobe transplants. Series: Boston College Working Papers in Economics Number: 951 Creation-Date: 20180515 Keywords: Market design, liver exchange, matching, incentive compatibility, efficiency Classification-JEL: D47, C78 Publication-Status: published, Econometrica, 88:3, 965-1005, 2020. File-URL: http://fmwww.bc.edu/EC-P/wp951.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:951 Template-Type: ReDIF-Paper 1.0 Title: On the Quantity and Quality of Girls: Fertility, Parental Investments, and Mortality Author-Name: S Anukriti Author-X-Name-First: S Author-X-Name-Last: Anukriti Author-Person: pan412 Author-Email: anukriti@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Workplace-Name: IZA Author-Name: Sonia Bhalotra Author-X-Name-First: Sonia Author-X-Name-Last: Bhalotra Author-Person: pbh22 Author-Workplace-Name: University of Essex Author-Email: srbhal@essex.ac.uk Author-Name: Hiu Tam Author-X-Name-First: Hiu Author-X-Name-Last: Tam Author-Workplace-Name: University of Oxford Author-Email: eddy.tam@sbs.ox.ac.uk Abstract: The introduction of prenatal sex-detection technologies in India has led to a phenomenal increase in abortion of female fetuses. We examine fertility and investment responses to these technologies. We find a moderation of son-biased fertility stopping, erosion of gender gaps in parental investments in breastfeeding and immunization, and convergence in the under-5 mor- tality rates of boys and girls. For every three aborted girls, roughly one additional girl survives to age five. We also find a shift in the distribution of girls in favor of low-socioeconomic status families. Our findings have implications not only for counts of missing girls but also for the later life outcomes of girls conditioned by greater early life investments in them. Keywords: abortion, child mortality, fertility, gender, health, India, missing girls, parental investments, prenatal sex detection, sex-selection, ultrasound Classification-JEL: I15, J13, J16 Series: Boston College Working Papers in Economics Number: 950 Creation-Date: 20180115 File-URL: http://fmwww.bc.edu/EC-P/wp950.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:950 Template-Type: ReDIF-Paper 1.0 Title: Household Savings and Marriage Payments: Evidence from Dowry in India Author-Name: S Anukriti Author-X-Name-First: S Author-X-Name-Last: Anukriti Author-Person: pan412 Author-Email: anukriti@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Workplace-Name: IZA Author-Name: Sungoh Kwon Author-X-Name-First: Sungoh Author-X-Name-Last: Kwon Author-Workplace-Name: University of Connecticut Author-Email: sungoh.kwon@uconn.edu Author-Name: Nishith Prakash Author-X-Name-First: Nishith Author-X-Name-Last: Prakash Author-Workplace-Name: University of Connecticut Author-Email: nishith.prakash@uconn.edu Author-Person: ppr96 Abstract: This paper examines how traditional marriage market institutions affect households’ financial decisions. We study how bride-to-groom marriage payments, i.e., dowries, influence saving behavior in rural India. Exploiting variation in firstborn gender and heterogeneity in dowry amounts across marriage markets, we find that the prospect of paying higher dowry increases household savings, which are primarily financed through increased paternal labor supply. This is the first paper that highlights this alternative motive for savings in dowry-paying societies. However, we find no impacts of dowry expectations on son-preferring fertility behaviors and investments in girls. Keywords: Household Savings, Dowry, Marriage Payments, India, Labor Supply, Fertility, Sex Ratio, Child Investments Classification-JEL: J1, D14, O15 Series: Boston College Working Papers in Economics Number: 949 Creation-Date: 20180409 File-URL: http://fmwww.bc.edu/EC-P/wp949.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:949 Template-Type: ReDIF-Paper 1.0 Title: The Economic Determinants of Crime: an Approach through Responsiveness Scores Author-Name: Giovanni Cerulli Author-X-Name-First: Giovanni Author-X-Name-Last: Cerulli Author-Person: pce40 Author-Workplace-Name: CNR-IRCrES Author-Email: giovanni.cerulli@ircres.cnr.it Author-Name: Maria Ventura Author-X-Name-First: Maria Author-X-Name-Last: Ventura Author-Workplace-Name: STICERD, London School of Economics Author-Email: m.ventura@lse.ac.uk Author-Name: Christopher F Baum Author-X-Name-First: Christopher Author-X-Name-Last: Baum Author-Person: pba1 Author-Email: baum@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Workplace-Name: DIW Berlin Abstract: Criminality has always been part of human social interactions, shaping the way peoples have constructed states and legislation. As social order became a greater concern for the public authorities, interest in investigating incentives pushing individuals towards engaging in illegal activities has become a central issue of the political agenda. Building on the existing literature, this paper proposes to focus on a few primary determinants of crime, whose effect is in- vestigated using a Responsiveness Scores (RS) approach performed over 50 US states during the period 2000-2012. The RS approach allows us to account for unit heterogeneous response to each single determinant, thus paving the way to a more in-depth analysis of the relation between crime and its drivers. We attempt to overcome the limitations posed by standard regression methods, which assume a single coefficient for all determinants, thus contributing to the literature in the field with stronger evidence on determinants' e ects and the geographical patterns of responsiveness scores. Keywords: Crime, Incentives, Responsiveness Scores Classification-JEL: K42, J24, P46 Series: Boston College Working Papers in Economics Number: 948 Creation-Date: 20180331 File-URL: http://fmwww.bc.edu/EC-P/wp948.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:948 Template-Type: ReDIF-Paper 1.0 Title: Exclusion Restrictions in Dynamic Binary Choice Panel Data Models Author-Name: Songnian Chen Author-X-Name-First: Songnian Author-X-Name-Last: Chen Author-WorkPlace-Name: HKUST Author-Name: Shakeeb Khan Author-X-Name-First: Shakeeb Author-X-Name-Last: Khan Author-Person: phk401 Author-Email: shakeeb.khan@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Xun Tang Author-X-Name-First: Xun Author-X-Name-Last: Tang Author-Person: pta642 Author-WorkPlace-Name: Rice University Abstract: In this note we revisit the use of exclusion restrictions in the semiparametric binary choice panel data model introduced in Honore and Lewbel (2002). We show that in a dynamic panel data setting (where one of the pre-determined explanatory variables is the lagged dependent variable), the exclusion restriction in Honore and Lewbel (2002) implicitly re- quires serial independence condition on an observed regressor, that if violated in the data will result in their procedure being inconsistent. We propose a new identification strategy and estimation procedure for the semiparametric binary panel data model under exclusion restrictions that accommodate the serial correlation of observed regressors in a dynamic setting. The new estimator converges at the parametric rate to a limiting normal distribution. This rate is faster than the nonparametric rates of existing alternative estimators for the binary choice panel data model, including the static case in Manski (1987) and the dynamic case in Honore and Kyriazidou (2000). Classification-JEL: C14, C23, C25 Keywords: Panel Data, Dynamic Binary Choice, Exclusion Restriction Series: Boston College Working Papers in Economics Number: 947 Creation-Date: 20180212 File-URL: http://fmwww.bc.edu/EC-P/wp947.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:947 Template-Type: ReDIF-Paper 1.0 Title: Measuring the Return to Online Advertising: Estimation and Inference of Endogenous Treatment Effects Author-Name: Shakeeb Khan Author-X-Name-First: Shakeeb Author-X-Name-Last: Khan Author-Person: phk401 Author-Email: shakeeb.khan@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Denis Nekipelov Author-X-Name-First: Denis Author-X-Name-Last: Nekipelov Author-WorkPlace-Name: University of Virginia Author-Person: pne42 Author-Name: Justin Rao Author-X-Name-First: Justin Author-X-Name-Last: Rao Author-WorkPlace-Name: Microsoft Research Abstract: In this paper we aim to conduct inference on the “lift” effect generated by an online advertisement display: specifically we want to analyze if the presence of the brand ad among the advertisements on the page increases the overall number of consumer clicks on that page. A distinctive feature of online advertising is that the ad displays are highly targeted- the advertising platform evaluates the (unconditional) probability of each consumer clicking on a given ad which leads to a higher probability of displaying the ads that have a higher a priori estimated probability of click. As a result, inferring the causal effect of the ad display on the page clicks by a given consumer from typical observational data is difficult. To address this we use the large scale of our dataset and propose a multi-step estimator that focuses on the tails of the consumer distribution to estimate the true causal effect of an ad display. This “identification at infinity” (Chamberlain (1986)) approach alleviates the need for independent experimental randomization but results in nonstandard asymptotics. To validate our estimates, we use a set of large scale randomized controlled experiments that Microsoft has run on its advertising platform. Our dataset has a large number of observations and a large number of variables and we employ LASSO to perform variable selection. Our non-experimental estimates turn out to be quite close to the results of the randomized controlled trials. Classification-JEL: C14, C31, C55, C90, M37 Keywords: Endogenous treatment effects, randomized control trials, online advertising, lift effect Series: Boston College Working Papers in Economics Number: 946 Creation-Date: 20180201 File-URL: http://fmwww.bc.edu/EC-P/wp946.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:946 Template-Type: ReDIF-Paper 1.0 Title: Equilibria in Bottleneck Games Author-Name: Ryo Kawasaki Author-X-Name-First: Ryo Author-X-Name-Last: Kawasaki Author-Name: Hideo Konishi Author-X-Name-First: Hideo Author-X-Name-Last: Konishi Author-Person: pko35 Author-Email: konishih@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Junki Yukawa Author-X-Name-First: Junki Author-X-Name-Last: Yukawa Series: Boston College Working Papers in Economics Number: 945 Abstract: This paper introduces a bottleneck game with finite sets of commuters and departing time slots as an extension of congestion games by Milchtaich (1996). After characterizing Nash equilibrium of the game, we provide sufficient conditions for which the equivalence between Nash and strong equilibria holds. Somewhat surprisingly, unlike in congestion games, a Nash equilibrium in pure strategies may often fail to exist, even when players are homogeneous. In contrast, when there is a continuum of atomless players, the existence of a Nash equilibrium and the equivalence between the set of Nash and strong equilibria hold as in congestion games (Konishi, Le Breton, and Weber, 1997a). Classification-JEL: C72, R41 Keywords: congestion game, bottleneck model, Nash equlibrium, strong equilibrium, equivalence, existence Creation-Date: 20180120 File-URL: http://fmwww.bc.edu/EC-P/wp945.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:945 Template-Type: ReDIF-Paper 1.0 Title: Silent Promotion of Agendas: Campaign Contributions and Ideological Polarization Author-Name: Hideo Konishi Author-X-Name-First: Hideo Author-X-Name-Last: Konishi Author-Person: pko35 Author-Email: konishih@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Chen-Yu Pan Author-X-Name-First: Chen-Yu Author-X-Name-Last: Pan Author-Workplace-Name: Wuhan University Series: Boston College Working Papers in Economics Number: 944 Abstract: Until recently, both Republican and Democratic administrations have been promoting free trade and market deregulation for decades without intensive policy debates. We set up a two-party electoral competition model in a two-dimensional policy space with campaign contributions by an interest group that promotes a certain agenda. Assuming that voters are impressionable to campaign spending for/against candidates, we analyze incentive compatible contracts between the interest group and the candidates on agenda policy positions and campaign contributions. The interest group asks the candidates to commit to its agenda in exchange for campaign contributions, letting them compete over the other (ideological) dimension only. It is shown that, as the agenda is pushed further by the interest group, ideological policy polarization and campaign contributions surge. Classification-JEL: C72, D72, F02, F13 Keywords: electoral competition, probabilistic voting, campaign contributions, interest groups, impressionable voters, polarization Creation-Date: 20180111 Revision-Date: 20180725 File-URL: http://fmwww.bc.edu/EC-P/wp944.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:944 Template-Type: ReDIF-Paper 1.0 Title: Bond Convenience Yields and Exchange Rate Dynamics Author-Name: Rosen Valchev Author-X-Name-First: Rosen Author-X-Name-Last: Valchev Author-Person: pva831 Author-Email: rosen.valchev@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: This paper proposes a new explanation for the failure of Uncovered Interest Parity (UIP) that rationalize both the classic UIP puzzle and the evidence that the puzzle reverses direction at longer horizons. In the model, excess currency returns arise as compensation for endogenous fluctuations in bond convenience yield differentials. Due to the interaction of monetary and fiscal policy, the impulse response of the equilib- rium convenience yield is non-monotonic, which generates the reversal of the puzzle. The model fits exchange rate dynamics very well, and I also find direct evidence that convenience yields indeed drive excess currency returns. Classification-JEL: F31, F41, F42, E43, E52, E63 Keywords: Uncovered Interest Rate Parity, Exchange Rates, Open Economy Macroeconomics, Bond Convenience Yield, Monetary-Fiscal Interaction, Government Debt Dynamics Series: Boston College Working Papers in Economics Number: 943 Creation-Date: 20171016 File-URL: http://fmwww.bc.edu/EC-P/wp943.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:943 Template-Type: ReDIF-Paper 1.0 Title: Beyond Home Bias: Portfolio Holdings and Information Heterogeneity Author-Name: Filippo De Marco Author-X-Name-First: Filippo Author-X-Name-Last: De Marco Author-Email: filippo.demarco@unibocconi.it Author-WorkPlace-Name: Bocconi University Author-Name: Marco Macchiavelli Author-X-Name-First: Marco Author-X-Name-Last: Macchiavelli Author-Email: marco.macchiavelli@frb.gov Author-WorkPlace-Name: Federal Reserve Board Author-Name: Rosen Valchev Author-X-Name-First: Rosen Author-X-Name-Last: Valchev Author-Person: pva831 Author-Email: rosen.valchev@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: We investigate whether information frictions are important determinants of banks’ sovereign debt portfolios. Going beyond the classic home versus foreign distinction in holdings, we study the heterogeneity within the foreign sovereign portfolio. First, we propose a modified version of the Van Nieuwerburgh and Veldkamp (2009) model with a two-tiered information structure that links portfolio holdings and information acquisition. Second, we find strong support for the key predictions of the model in the data: if a bank makes a forecast for a given country, it is more likely to hold debt of that country. Moreover, more optimistic and more precise forecasts predict larger portfolio holdings. Classification-JEL: G11, G21, F30 Keywords: Home bias, Information frictions, Portfolio choice, Banks Series: Boston College Working Papers in Economics Number: 942 Creation-Date: 20180109 File-URL: http://fmwww.bc.edu/EC-P/wp942.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:942 Template-Type: ReDIF-Paper 1.0 Title: Dynamic Information Acquisition and Portfolio Bias Author-Name: Rosen Valchev Author-X-Name-First: Rosen Author-X-Name-Last: Valchev Author-Person: pva831 Author-Email: rosen.valchev@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: While international portfolios are still heavily biased towards home assets, the home bias has exhibited a clear downward trend in the last few decades. Interestingly, the underlying rise in foreign investment has been primarily directed to just a handful of OECD countries, and has not given rise to an across the board increase in all foreign investments. To understand the evolution of the home bias, this paper develops a dynamic model of information acquisition and portfolio choice. The dynamic framework introduces two new endogenous forces due to the fact that asset payoffs depend on the future asset prices and hence on the future information sets. First, there is a measure of endogenous unlearnable uncertainty in asset payoffs which generates decreasing returns to information when agents are sufficiently well informed about an asset, and hence gives a reason to diversify information and portfolios. In addition, the dynamic framework introduces a strategic complementarity in learning, due to the “beauty contest” of dynamic asset markets, which is absent in the benchmark static model where learning is purely a strategic substitute. As a result of both of these new endogenous forces, the model can explain the high overall level of the home bias, its decline over time and the fact that the rise in foreign investment has been coordinated on just a handful of destination countries. Moreover, the model predicts that the home bias decline is linked to the fall in information costs, and I find direct evidence of this in the data. Classification-JEL: F3, G11, G15, D8, D83 Keywords: Home Bias, Information Choice, Portfolio Choice, Dynamics Series: Boston College Working Papers in Economics Number: 941 Creation-Date: 20170601 File-URL: http://fmwww.bc.edu/EC-P/wp941.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:941 Template-Type: ReDIF-Paper 1.0 Title: Paralyzed by Fear: Rigid and Discrete Pricing under Demand Uncertainty Author-Name: Cosmin Ilut Author-X-Name-First: Cosmin Author-X-Name-Last: Ilut Author-Email: cosmin.ilut@duke.edu Author-WorkPlace-Name: Duke University Author-Name: Rosen Valchev Author-X-Name-First: Rosen Author-X-Name-Last: Valchev Author-Person: pva831 Author-Email: rosen.valchev@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Nicolas Vincent Author-X-Name-First: Nicolas Author-X-Name-Last: Vincent Author-Email: nicolas.vincent@hec.ca Author-WorkPlace-Name: HEC Montreal Abstract: Price rigidity is central to many predictions of modern macroeconomic models, yet, standard models are at odds with certain robust empirical facts from micro price datasets. We propose a new, parsimonious theory of price rigidity, built around the idea of demand uncertainty, that is consistent with a number of salient micro facts. In the model, the monopolistic firm faces Knightian uncertainty about its competitive environment, which has two key implications. First, the firm is uncertain about the shape of its demand function, and learns about it from past observations of quantities sold. This leads to kinks in the expected profit function at previously observed prices, which act as endogenous costs of changing prices and generate price stickiness and a discrete price distribution. Second, the firm is uncertain about how aggregate prices relate to the prices of its direct competitors, and the resulting robust pricing decision makes our rigidity nominal in nature. Classification-JEL: C1, D8, E3, L11 Keywords: price rigidity, demand uncertainty Series: Boston College Working Papers in Economics Number: 940 Creation-Date: 20160301 File-URL: http://fmwww.bc.edu/EC-P/wp940.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:940 Template-Type: ReDIF-Paper 1.0 Title: The Impact of Uncertainty on Financial Institutions Author-Name: Christopher F Baum Author-X-Name-First: Christopher Author-X-Name-Last: Baum Author-Person: pba1 Author-Email: baum@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Workplace-Name: DIW Berlin Author-Name: Mustafa Caglayan Author-X-Name-First: Mustafa Author-X-Name-Last: Caglayan Author-Person: pca30 Author-Workplace-Name: Heriot-Watt University Author-Email: m.caglayan@hw.ac.uk Author-Name: Bing Xu Author-X-Name-First: Bing Author-X-Name-Last: Xu Author-Person: pxu82 Author-Workplace-Name: Heriot-Watt University Author-Email: b.xu@hw.ac.uk Abstract: We examine the effects of uncertainty on several facets of the financial sector. Using a large country-level unbalanced panel dataset, we show that inflation uncertainty reduces availability of private sector credit; harms banks’ efficiency and operational performance, evidenced by lower returns and increased reliance on non-interest income activities; and distorts sectoral stability, as liquidity, banks’ appetite for risk and credit risk increases. Our findings, based on the full dataset and country splits, are economically meaningful and provide evidence that uncertainty harms the overall health of the financial sector. Keywords: financial depth; profitability; non-interest income; stability; uncertainty Note: previously circulated as "Uncertainty Effects on the Financial Sector: International Evidence" Classification-JEL: C22, C23, D81, E51 Series: Boston College Working Papers in Economics Number: 939 Publication-Status: forthcoming, International Journal of Finance and Economics Creation-Date: 20171209 Revision-Date: 20180920 File-URL: http://fmwww.bc.edu/EC-P/wp939.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:939 Template-Type: ReDIF-Paper 1.0 Title: Allan Meltzer’s Model of the Transmission Mechanism and Its Implications for Today Author-Name: Peter N. Ireland Author-X-Name-First: Peter Author-X-Name-Last: Ireland Author-Person: pir1 Author-Email: peter.ireland@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: Allan Meltzer developed his model of the monetary transmission mechanism in research conducted with Karl Brunner. The Brunner-Meltzer model implies that the Federal Reserve would benefit from drawing brighter lines between monetary and fiscal policy actions, eschewing credit market intervention and focusing, instead, on using its control over the monetary base to stabilize the aggregate price level. The model downplays the importance of the zero lower interest rate bound and suggests a greater role for monetary aggregates in the Fed’s policymaking strategy. Finally, it highlights the benefits that accrue when policy is conducted according to a rule rather than discretion. Classification-JEL: B31, E52 Keywords: Allan Meltzer, Karl Brunner, Monetarism, Monetary Transmission Mechanism Series: Boston College Working Papers in Economics Number: 938 Creation-Date: 20171115 File-URL: http://fmwww.bc.edu/EC-P/wp938.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:938 Template-Type: ReDIF-Paper 1.0 Title: The Demand for Divisia Money: Theory and Evidence Author-Name: Michael T. Belongia Author-X-Name-First: Michael Author-X-Name-Last: Belongia Author-Workplace-Name: University of Mississippi Author-Name: Peter N. Ireland Author-X-Name-First: Peter Author-X-Name-Last: Ireland Author-Person: pir1 Author-Email: peter.ireland@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: A money-in-the-utility function model is extended to capture the distinct roles of noninterest-earning currency and interest-earning deposits in providing liquidity services to households. It implies the existence of a stable money demand relationship that links a Divisia monetary aggregate to spending or income as a scale variable and the associated Divisia user-cost dual as an opportunity cost measure. Cointegrating money demand equations of this form appear in quarterly United States data spanning the period from 1967:1 through 2017:2, especially for the Divisia M2 aggregate. The identification of a stable money demand function over a period that includes the financial innovations of the 1980s and continues through the recent financial crisis and Great Recession suggests that a properly measured aggregate quantity of money can play a role in the conduct of monetary policy. That role can be of greater prominence when traditional interest rate policies are constrained by the zero lower bound. Classification-JEL: C43, E41 Keywords: Divisia monetary aggregates, money demand, money-in-the-utility function Series: Boston College Working Papers in Economics Number: 937 Creation-Date: 20171101 File-URL: http://fmwww.bc.edu/EC-P/wp937.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:937 Template-Type: ReDIF-Paper 1.0 Title: Capital Flows and Financial Stability in Emerging Economies Author-Name: Christopher F. Baum Author-X-Name-First: Christopher Author-X-Name-Last: Baum Author-Person: pba1 Author-Email: baum@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Workplace-Name: DIW Berlin Author-Name: Madhavi Pundit Author-X-Name-First: Madhavi Author-X-Name-Last: Pundit Author-Workplace-Name: Asian Development Bank Author-Email: mpundit@adb.org Author-Name: Arief Ramayandi Author-X-Name-First: Arief Author-X-Name-Last: Ramayandi Author-Workplace-Name: Asian Development Bank Author-Email: aramayandi@adb.org Abstract: There is mixed evidence for the impact of international capital flows on financial sector's stability. This paper investigates the relationship between components of gross capital flows and various financial stability indicators for 16 emerging and newly industrialized economies. Departing from panel data methods, for each financial stability proxy, we employ systems of seemingly unrelated regression estimators to allow variation in the estimated relationship across countries, while permitting crossequation restrictions to be imposed within a country. The findings suggest that, after controlling for macroeconomic factors, there are significant effects of different gross capital flow measures on the financial stability proxies. However, the effects are not homogeneous across our sample economies and across flows. Country-specific financial and macroeconomic characteristics help to explain some of these differences. Keywords: emerging economies, financial stability, international capital flows Classification-JEL: E44, F41 Series: Boston College Working Papers in Economics Number: 936 Publication-Status: published, ADB Working Paper Series, https://www.adb.org/publications/capital-flows-financial-stability-emerging-economies Note: This paper was first circulated by the Asian Development Bank as ADB Economics Working Paper 522 Creation-Date: 20171030 File-URL: http://fmwww.bc.edu/EC-P/wp936.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:936 Template-Type: ReDIF-Paper 1.0 Title: Recoverability Author-Name: Ryan Chahrour Author-X-Name-First: Ryan Author-X-Name-Last: Chahrour Author-Person: pch1111 Author-Email: ryan.chahrour@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Kyle Jurado Author-X-Name-First: Kyle Author-X-Name-Last: Jurado Author-WorkPlace-Name: Duke University Author-Email: kyle.jurado@duke.edu Abstract: When can structural shocks be recovered from observable data? We present a necessary and sufficient condition that gives the answer for any linear model. Invertibility, which requires that shocks be recoverable from current and past data only, is sufficient but not necessary. This means that semi-structural empirical methods like structural vector autoregression analysis can be applied even to models with non-invertible shocks. We illustrate these results in the context of a simple model of consumption determination with productivity shocks and non-productivity noise shocks. In an application to postwar U.S. data, we find that non-productivity shocks account for a large majority of fluctuations in aggregate consumption over business cycle frequencies. Classification-JEL: D84, E32, C31 Keywords: structural vector autoregression, noise shocks Series: Boston College Working Papers in Economics Number: 935 Creation-Date: 20171101 File-URL: http://fmwww.bc.edu/EC-P/wp935.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:935 Template-Type: ReDIF-Paper 1.0 Title: International Medium of Exchange: Privilege and Duty Author-Name: Ryan Chahrour Author-X-Name-First: Ryan Author-X-Name-Last: Chahrour Author-Person: pch1111 Author-Email: ryan.chahrour@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Rosen Valchev Author-X-Name-First: Rosen Author-X-Name-Last: Valchev Author-Person: pva831 Author-Email: rosen.valchev@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: The United States enjoys an “exorbitant privilege” that allows it to borrow at especially low interest rates. Meanwhile, the dollarization of world trade appears to shield the U.S. from international disturbances. We provide a new theory that links dollarization and exorbitant privilege through the need for an international medium of exchange. We consider a two-country world where international trade happens in decentralized matching markets, and must be collateralized by assets — a.k.a. currencies — issued by one of the two countries. Traders have an incentive to coordinate their currency choices and a single dominant currency arises in equilibrium. With small heterogeneity in traders’ information, the model delivers a unique mapping from economic conditions to the dominant currency. Nevertheless, the model delivers a dynamic multiplicity: in steady-state either currency can serve as the international medium of exchange. The economy with the dominant currency enjoys lower interest rates and the ability to run current account deficits indefinitely. Currency regimes are stable, but sufficiently large shocks or policy changes can lead to transitions, with large welfare implications. Classification-JEL: F3, G11, G15, D8, D83 Keywords: Home Bias, Information Choice, Portfolio Choice, Dynamics Series: Boston College Working Papers in Economics Number: 934 Creation-Date: 20171006 File-URL: http://fmwww.bc.edu/EC-P/wp934.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:934 Template-Type: ReDIF-Paper 1.0 Title: Money-Multiplier Shocks Author-Name: Luca Benati Author-X-Name-First: Luca Author-X-Name-Last: Benati Author-Workplace-Name: University of Bern Author-Email: luca.benati@vwi.unibe.ch Author-Person: pbe573 Author-Name: Peter N. Ireland Author-X-Name-First: Peter Author-X-Name-Last: Ireland Author-Person: pir1 Author-Email: peter.ireland@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: Shocks to the M1 multiplier–in particular, shocks to the reserves/deposits ratio–played a key role in driving U.S. macroeconomic fluctuations during the interwar period, but their role in the post-WWII era has been almost uniformly negligible. The only exception are shocks to the currency/deposits ratio, which played a sizeable role for inflation and M1 velocity. By contrast, shocks to the multiplier of the non-M1 component of M2, which had been irrelevant in the interwar period, have played a significant role in driving the nominal side of the economy during the post-WWII period up to the collapse of Lehman Brothers, in particular during the Great Inflation episode. During either period, the multiplier of M2-M1 has been cointegrated with the short rate. The monetary base had exhibited a non-negligible amount of permanent variation during the interwar period, whereas it has been trend-stationary during the post-WWII era. In spite of the important role played by shocks to the multiplier of M2-M1 during the post-WWII period, we still detect a non-negligible role for a nonmonetary permanent inflation shock, which has the natural interpretation of a disturbance originating from the progressive de-anchoring of inflation expectations which started in the mid-1960s, and their gradual re-anchoring following the beginning of the Volcker disinflation. Classification-JEL: E31, E32, E41, E42, E51, E52, E58 Keywords: Money multiplier; money demand; Lucas critique; structural VARs; unit roots; cointegration; long-run restrictions. Series: Boston College Working Papers in Economics Number: 933 Creation-Date: 20170801 File-URL: http://fmwww.bc.edu/EC-P/wp933.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:933 Template-Type: ReDIF-Paper 1.0 Title: Market Design for Living-Donor Organ Exchanges: An Economic Policy Perspective Author-Name: Tayfun Sönmez Author-X-Name-First: Tayfun Author-X-Name-Last: Sönmez Author-Email: sonmezt@bc.edu Author-Person: psi57 Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: M. Utku Ünver Author-X-Name-First: M. Author-X-Name-Last: Ünver Author-Person: pun2 Author-Workplace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: Within the last decade kidney exchanges emerged as a modality of transplantation to better utilize living donation possibilities as a cross disciplinary success of medical doctors and ethicists, market design economists, and computer scientists. This paper summarizes at which fronts these efforts have been successful and what needs to be done further to increase their impact. Also this paradigm is partially being applied to liver exchanges. There are other organs for which living donation is possible and gains from exchange can be much bigger than kidneys. Recent academic work on single-graft liver and dual-donor organ exchanges for lobar lung, dual-graft liver, and simultaneous liver-kidney transplantation are also discussed. Series: Boston College Working Papers in Economics Number: 932 Creation-Date: 20170630 Keywords: Market design, organ allocation, kidney exchange, equity, efficiency Classification-JEL: D47, C78 File-URL: http://fmwww.bc.edu/EC-P/wp932.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:932 Template-Type: ReDIF-Paper 1.0 Title: Incentivized Kidney Exchange Author-Name: Tayfun Sönmez Author-X-Name-First: Tayfun Author-X-Name-Last: Sönmez Author-Email: sonmezt@bc.edu Author-Person: psi57 Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: M. Utku Ünver Author-X-Name-First: M. Author-X-Name-Last: Ünver Author-Person: pun2 Author-Workplace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: M. Bumin Yenmez Author-X-Name-First: M. Bumin Author-X-Name-Last: Yenmez Author-Person: pye63 Author-Workplace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: Over the last 15 years, kidney exchange has become a mainstream paradigm to increase transplants. However, compatible pairs do not participate, and the full benefits from exchange can be realized only if they do. We propose incentivizing compatible pairs to participate in exchange by insuring their patients against future renal failure via increased priority in the deceased-donor queue. Efficiency and equity analyses of this scheme are conducted and compared with that of kidney exchange in a new dynamic continuum model. We calibrate the model with US data and quantify substantial gains from adopting incentivized exchange in efficiency and access equity. Series: Boston College Working Papers in Economics Number: 931 Creation-Date: 20170630 Revision-Date: 20180415 Keywords: Market design, organ allocation, kidney exchange, equity, efficiency, compatible pairs Classification-JEL: D47, C78 Note: A earlier version of this paper appears as WP 868. File-URL: http://fmwww.bc.edu/EC-P/wp931.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:931 Template-Type: ReDIF-Paper 1.0 Title: N-S Trade with Weak Institutions Author-Name: James E. Anderson Author-X-Name-First: James Author-X-Name-Last: Anderson Author-Person: pan2 Author-Email: anderson@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: States with weak institutions can lose from trade with strong states when trade is subject to predation. The happy liberal idea of trade fostering better institutions and peace can be turned on its head. The Ricardian model of trade subject to predation offered here implies imperialism without capital, contra Marxists. Weak and poor South trades with strong and rich North. Poor South labor is attracted to predation. Labor market effects of predation and enforcement amplify opposing interests in the terms of trade, potentially obviating the standard gains from trade that allows bargaining solutions to surplus division. Series: Boston College Working Papers in Economics Number: 930 Creation-Date: 20170623 Keywords: Predation, enforcement, colonialism Classification-JEL: F13, F14, F16 File-URL: http://fmwww.bc.edu/EC-P/wp930.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:930 Template-Type: ReDIF-Paper 1.0 Title: Internal Capital Markets in Times of Crisis: The Benefit of Group Affiliation in Italy Author-Name: Raffaele Santioni Author-X-Name-First: Raffaele Author-X-Name-Last: Santioni Author-WorkPlace-Name: Bank of Italy Author-Name: Fabio Schiantarelli Author-X-Name-First: Fabio Author-X-Name-Last: Schiantarelli Author-Email: schianta@bc.edu Author-Person: psc8 Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Workplace-Name: IZA Author-Name: Philip E. Strahan Author-X-Name-First: Philip Author-X-Name-Last: Strahan Author-WorkPlace-Name: Boston College Author-Workplace-Name: NBER Abstract: Firms affiliated with business groups survive the stress of the global financial and euro crises better than unaffiliated firms. Using granular data from Italy, we show that better performance stems partly from access to an internal capital market, as the survival value of group-affiliated firms increases with group-wide cash flow. Internal cash transfers increase when banks’ health deteriorates, with funds moving from cash-rich to cash-poor firms and, some evidence suggests, to firms with favorable investment opportunities. Internal capital markets’ role thus increases when external markets (banks) are distressed. Series: Boston College Working Papers in Economics Number: 929 Creation-Date: 20170531 Revision-Date: 20190820 Publication-Status: forthcoming, Review of Finance Keywords: Business groups, internal capital markets, financial crisis Classification-JEL: G01, G21, G31, G33 File-URL: http://fmwww.bc.edu/EC-P/wp929.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:929 Template-Type: ReDIF-Paper 1.0 Title: Short Run Gravity Author-Name: James E. Anderson Author-X-Name-First: James Author-X-Name-Last: Anderson Author-Person: pan2 Author-Email: anderson@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Yoto V. Yotov Author-X-Name-First: Yoto Author-X-Name-Last: Yotov Author-Workplace-Name: Drexel University Author-Person: pyo93 Abstract: Short run gravity is a geometric weighted average of long run gravity and bilateral capacity. The model features (i) joint trade costs endogenous to bilateral volumes, (ii) long run gravity as a limiting case of efficient investment in bilateral capacities, (iii) a structural ratio of short run to long run trade elasticities equal to a microfounded buyers' incidence elasticity, and (iv) tractable short and long run models of the extensive margin. Application to manufacturing trade of 52 countries during the globalization period 1988-2006 strongly supports the model. Results solve several time invariance and trade elasticity puzzles in the literature. Series: Boston College Working Papers in Economics Number: 928 Creation-Date: 20170523 Keywords: trade elasticity puzzles, export dynamics, missing globalization. Classification-JEL: F13, F14, F16 File-URL: http://fmwww.bc.edu/EC-P/wp928.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:928 Template-Type: ReDIF-Paper 1.0 Title: Identification and Estimation Using Heteroscedasticity Without Instruments: The Binary Endogenous Regressor Case Author-Name: Arthur Lewbel Author-X-Name-First: Arthur Author-X-Name-Last: Lewbel Author-Person: ple43 Author-Email: lewbel@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: Lewbel (2012) provides an estimator for linear regression models containing an endogenous regressor, when no outside instruments or other such information is available. The method works by exploiting model heteroscedasticity to construct instruments using the available regressors. Some authors have considered the method in empirical applications where an endogenous regressor is binary (e.g., endogenous Diff-in-Diff or endogenous binary treatment models), without proving validity of the estimator in that case. The present paper shows that the assumptions required for Lewbel’s estimator can indeed be satisfied when an endogenous regressor is binary. Keywords: Simultaneous systems, linear regressions, endogeneity, identification, heteroscedasticity, binary regressors, dummy regressors, linear probability model, logit, probit Classification-JEL: C35, C36, C30, C13 Series: Boston College Working Papers in Economics Number: 927 Creation-Date: 20161215 File-URL: http://fmwww.bc.edu/EC-P/wp927.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:927 Template-Type: ReDIF-Paper 1.0 Title: Campaign Contributions for Free Trade: Salient and Non-salient Agendas Author-Name: Hideo Konishi Author-X-Name-First: Hideo Author-X-Name-Last: Konishi Author-Person: pko35 Author-Email: konishih@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Chen-Yu Pan Author-X-Name-First: Chen-Yu Author-X-Name-Last: Pan Author-Workplace-Name: Wuhan University Author-Email: panwhu@126.com Series: Boston College Working Papers in Economics Number: 926 Abstract: Although protectionism became a salient issue in the 2016 presidential election campaign, both Republican and Democratic adminis- trations have been silently promoting free trade for decades. We set up a two-party electoral competition model in a two-dimensional policy space with campaign contributions by a group (exporting/multinational firms) that is interested in promoting free trade, for which voters do not have positive sentiment. Assuming that voters are impressionable to campaign spending for/against candidates, we analyze the optimal contract between the interest group and the candidates on policy is- sues and campaign contributions. If voters' negative sentiment to free trade is not too strong, the interest group tends to contribute to both candidates to make free trade a nonsalient issue, and the candidates compete over the other (ideological) dimension only. If votersíneg- ative sentiment to free trade is strong, the interest group tends to contribute to a more malleable candidate only. Classification-JEL: C72, D72, F02, F13 Keywords: electoral competition, campaign contribution, trade negotiation, GATT, preferential trade agreement, populism Creation-Date: 20170505 File-URL: http://fmwww.bc.edu/EC-P/wp926.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:926 Template-Type: ReDIF-Paper 1.0 Title: Robust Predictions for DSGE Models with Incomplete Information Author-Name: Ryan Chahrour Author-X-Name-First: Ryan Author-X-Name-Last: Chahrour Author-Person: pch1111 Author-Email: ryan.chahrour@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Robert Ulbricht Author-X-Name-First: Robert Author-X-Name-Last: Ulbricht Author-WorkPlace-Name: Toulouse School of Economics Abstract: We provide predictions for DSGE models with incomplete information that are robust across information structures. Our approach maps an incomplete-information model into a full-information economy with time-varying expectation wedges and provides conditions that ensure the wedges are rationalizable by some information structure. Using our approach, we quantify the potential importance of information as a source of business cycle fluctuations in an otherwise frictionless model. Our approach uncovers a central role for firm-specific demand shocks in supporting aggregate confidence fluctuations. Only if firms face unobserved local demand shocks can confidence fluctuations account for a significant portion of the US business cycle. Classification-JEL: E32, D84 Keywords: Business cycles, DSGE models, incomplete-information, information-robust predictions Note: previously circulated as "Information-driven Business Cycles: A Primal Approach" Series: Boston College Working Papers in Economics Number: 925 Creation-Date: 20170316 Revision-Date: 20210610 File-URL: http://fmwww.bc.edu/EC-P/wp925.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:925 Template-Type: ReDIF-Paper 1.0 Title: The Production Economics of The Economics Production Author-Name: Yushan Hu Author-X-Name-First: Yushan Author-X-Name-Last: Hu Author-Workplace-Name: Boston College Author-Name: Ben Li Author-X-Name-First: Ben Author-X-Name-Last: Li Author-Person: pli448 Author-Email: ben.li@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: The arrival of the internet age forces academic journals to adjust their output margins: journal length, article length, and number of published articles. Using data from 41 major economics journals spanning 21 years (1994-2014), we find that both journals and articles are getting longer, but the page share of an individual article within its journal is shrinking. This pattern is consistent with a monopolistic competition model that features within-firm (journal) specialization. As predicted by the model, the share of an individual article shrinks less in general-interest journals and better ranked journals, where expertise is less substitutable across topics. In this discipline that emphasizes the benefits of specialization, the expertise underpinning its publications is indeed divided in a specialized fashion. Classification-JEL: A11, D43 Keywords: Division of labor, history of economics, academic publishing Series: Boston College Working Papers in Economics Number: 924 Creation-Date: 20170306 File-URL: http://fmwww.bc.edu/EC-P/wp924.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:924 Template-Type: ReDIF-Paper 1.0 Title: The Dynamics of Gender Earnings Differentials: Evidence from Establishment Data Author-Name: Erling Barth Author-X-Name-First: Erling Author-X-Name-Last: Barth Author-WorkPlace-Name: Institute for Social Research, Oslo Author-WorkPlace-Name: NBER Author-Name: Sari Pekkala Kerr Author-X-Name-First: Sari Author-X-Name-Last: Kerr Author-WorkPlace-Name: Wellesley College Author-Name: Claudia Olivetti Author-X-Name-First: Claudia Author-X-Name-Last: Olivetti Author-Person: pol63 Author-Email: claudia.olivetti@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-WorkPlace-Name: NBER Abstract: We use a unique match between the 2000 Decennial Census of the United States and the Longitudinal Employer Household Dynamics (LEHD) data to analyze how much of the increase in the gender earnings gap over the lifecycle comes from shifts in the sorting of men and women across high- and low-pay establishments and how much is due to differential earnings growth within establishments. We find that for the college educated the increase is substantial and, for the most part, due to differential earnings growth within establishment by gender. The between component is also important. Differential mobility between establishments by gender can explain approximately thirty percent of the overall gap widening for this group. For those with no college, the, relatively small, increase of the gender gap over the lifecycle can be fully explained by differential moves by gender across establishments. The evidence suggests that, for both education groups, the between-establishment component of the increasing wage gap is entirely driven by those who are married. Classification-JEL: J16, J31 Keywords: earnings, gender differentials, earnings inequality Series: Boston College Working Papers in Economics Number: 923 Creation-Date: 20170228 File-URL: http://fmwww.bc.edu/EC-P/wp923.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:923 Template-Type: ReDIF-Paper 1.0 Title: Partisan and Bipartisan Gerrymandering Author-Name: Hideo Konishi Author-X-Name-First: Hideo Author-X-Name-Last: Konishi Author-Person: pko35 Author-Email: konishih@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Chen-Yu Pan Author-X-Name-First: Chen-Yu Author-X-Name-Last: Pan Author-Workplace-Name: Wuhan University Series: Boston College Working Papers in Economics Number: 922 Abstract: This paper analyzes the optimal partisan and bipartisan gerrymandering policies in a model with electoral competitions in policy positions and transfer promises. With complete freedom in redistricting, partisan gerrymandering policy generates the most one-sidedly biased district profile, while bipartisan gerrymandering generates the most polarized district profile. In contrast, with limited freedom in gerrymandering, both partisan and bipartisan gerrymandering tend to prescribe the same policy. Friedman and Holden (2009) find no significant empirical difference between bipartisan and partisan gerrymandering in explaining incumbent reelection rates. Our result suggests that gerrymanderers may not be as free in redistricting as popularly thought. Classification-JEL: C72, D72 Keywords: electoral competition, partisan gerrymandering, bipartisan gerrymandering, policy convergence/divergence, pork-barrel politics Creation-Date: 20161101 Revision-Date: 20180804 File-URL: http://fmwww.bc.edu/EC-P/wp922.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:922 Template-Type: ReDIF-Paper 1.0 Title: A Classical View of the Business Cycle Author-Name: Michael T. Belongia Author-X-Name-First: Michael Author-X-Name-Last: Belongia Author-Workplace-Name: University of Mississippi Author-Name: Peter N. Ireland Author-X-Name-First: Peter Author-X-Name-Last: Ireland Author-Person: pir1 Author-Email: peter.ireland@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: In the 1920s, Irving Fisher extended his previous work on the Quantity Theory to describe how, through an early version of the Phillips Curve, changes in the price level could affect both output and unemployment. At the same time, Holbrook Working designed a quantitative rule for achieving price stability through control of the money supply. This paper develops a structural vector autoregressive time series model that allows these "classical" channels of monetary transmission to operate alongside, or perhaps even instead of, the now-more-familiar interest rate channels of the canonical New Keynesian model. Even with Bayesian priors that intentionally favor the New Keynesian view, the United States data produce posterior distributions for the model's key parameters that are more consistent with the ideas of Fisher and Working. Changes in real money balances enter importantly into the model's aggregate demand relationship, while growth in Divisia M2 appears in the estimated monetary policy rule. Contractionary monetary policy shocks reveal themselves through persistent declines in nominal money growth instead of rising nominal interest rates. These results point to the need for new theoretical models that capture a wider range of channels through which monetary policy affects the economy and suggest that, even today, the monetary aggregates could play a useful role in the Federal Reserve's policymaking strategy. Classification-JEL: B12, E31, E32, E41, E43, E52 Keywords: Bayesian vector autoregression, Divisia monetary aggregate, Monetary transmission mechanism, New Keynesian model, Quantity Theory of money Series: Boston College Working Papers in Economics Number: 921 Creation-Date: 20161101 File-URL: http://fmwww.bc.edu/EC-P/wp921.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:921 Template-Type: ReDIF-Paper 1.0 Title: Why Has Inflation Been So Unresponsive to Economic Activity in Recent Years? Author-Name: Robert G. Murphy Author-X-Name-First: Robert Author-X-Name-Last: Murphy Author-Email: murphyro@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Person: pmu16 Abstract: Standard Phillips curve models relating price inflation to measures of slack in the economy suggest that the United States should have experienced an episode of deflation during the Great Recession and the subsequent sluggish recovery. But although inflation reached very low levels, prices continued to rise rather than fall. More recently, many observers have argued that inflation should have increased as the unemployment rate declined and labor markets tightened, but inflation has remained below the Federal Reserve’s policy target. This paper confirms that the slope of the Phillips curve has decreased over recent decades and is very close to zero today. I modify the Phillips curve to allow its slope to vary continuously through time drawing on theories of price-setting behavior when prices are costly to adjust and when information is costly to obtain. I find that adapting the Phillips curve to allow for time-variation in its slope helps explain inflation before, during, and after the Great Recession. Keywords: Inflation, Phillips curve, Great Recession Classification-JEL: E30, E31 Series: Boston College Working Papers in Economics Number: 920 Creation-Date: 20160430 File-URL: http://fmwww.bc.edu/EC-P/wp920.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:920 Template-Type: ReDIF-Paper 1.0 Title: Explaining Declines in US Rural Mortality, 1910-1933: The Role of County Health Departments Author-Name: Lauren Hoehn Velasco Author-X-Name-First: Lauren Author-X-Name-Last: Velasco Author-Person: pho636 Author-Email: lauren.hoehn@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: This study estimates the impact of an American rural public health program on child mortality over 1908 to 1933. Due to the absence of sanitation and child-oriented health services outside of urban areas, public and private agencies sponsored county-level health departments (CHDs) throughout the US. Variation in the location and timing of the CHDs identifies improvements in population health, which are captured entirely by children. Mortality declines emerge in infancy and gradually decay through childhood. Adversely affected areas with either an ample population of nonwhites or greater levels of preexisting infectious disease undergo larger reductions in mortality. Classification-JEL: I15, I18, N31, N32, O12, O18 Keywords: mortality, health, development, rural population, demographic transition Series: Boston College Working Papers in Economics Number: 919 Creation-Date: 20161001 File-URL: http://fmwww.bc.edu/EC-P/wp919.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:919 Template-Type: ReDIF-Paper 1.0 Title: Corporate Financial Policy and the Value of Cash under Uncertainty Author-Name: Christopher F. Baum Author-X-Name-First: Christopher Author-X-Name-Last: Baum Author-Person: pba1 Author-Email: baum@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Workplace-Name: DIW Berlin Author-Name: Atreya Chakraborty Author-X-Name-First: Atreya Author-X-Name-Last: Chakraborty Author-Person: pch70 Author-Workplace-Name: University of Massachusetts-Boston Author-Email: atreya.chakraborty@umb.edu Author-Name: Boyan Liu Author-X-Name-First: Boyan Author-X-Name-Last: Liu Author-Workplace-Name: Beihang University Abstract: In this paper we provide evidence on how firm-specific and macroeconomic uncertainty affects shareholders' valuation of a firm's cash holdings. This extends previous work on this issue by highlighting the importance of the source of uncertainty. Our findings indicate that increases in firm-specific risk generally increase the value of cash while increases in macroeconomic risk generally decrease the value of cash. These findings are robust to alternative definitions of the unexpected change in cash. We extend our analysis to financially constrained and unconstrained firms. Keywords: cash holdings, marginal value of cash, macro uncertainty, idiosyncratic uncertainty, financial constraints Classification-JEL: G32, G34, D81 Series: Boston College Working Papers in Economics Number: 918 Publication-Status: forthcoming, International Journal of Managerial Finance Creation-Date: 20160720 File-URL: http://fmwww.bc.edu/EC-P/wp918.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:918 Template-Type: ReDIF-Paper 1.0 Title: News or Noise? The Missing Link Author-Name: Ryan Chahrour Author-X-Name-First: Ryan Author-X-Name-Last: Chahrour Author-Person: pch1111 Author-Email: ryan.chahrour@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Kyle Jurado Author-X-Name-First: Kyle Author-X-Name-Last: Jurado Author-WorkPlace-Name: Duke University Author-Email: kyle.jurado@duke.edu Abstract: The macroeconomic literature on belief-driven business cycles treats news and noise as distinct representations of people's beliefs about economic fundamentals. We prove that these two representations are actually observationally equivalent. This means that the decision to use one representation or the other must be made on theoretical, and not empirical, grounds. Our result allows us to determine the importance of beliefs as an independent source of fluctuations. Using three prominent models from this literature, we show that existing research has understated the importance of independent shocks to beliefs. This is because representations with anticipated and unanticipated shocks mix the fluctuations due independently to beliefs with the fluctuations due to fundamentals. We also argue that the observational equivalence of news and noise representations implies that structural vector auto-regression analysis is equally appropriate for recovering both news and noise shocks. Classification-JEL: D84, E32, C31 Keywords: News, noise, business cycles, structural vector autoregression Series: Boston College Working Papers in Economics Number: 917 Creation-Date: 20160907 Revision-Date: 20171102 File-URL: http://fmwww.bc.edu/EC-P/wp917.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:917 Template-Type: ReDIF-Paper 1.0 Title: Arrovian Efficiency in Allocation of Discrete Resources Author-Name: Marek Pycia Author-X-Name-First: Marek Author-X-Name-Last: Pycia Author-Email: marek.pycia@econ.uzh.ch Author-WorkPlace-Name: University of Zurich Author-Person: ppy24 Author-Name: M. Utku Ünver Author-X-Name-First: M. Author-X-Name-Last: Ünver Author-Person: pun2 Author-Workplace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: Efficiency in the Pareto sense and strategy-proofness have been the central design desiderata in market design for allocation of discrete resources, such as dorm allocation, school choice, and kidney exchange. However, more precise efficiency objectives, such as welfare maximization, have been neglected. In a setting where heterogeneous indivisible goods are being allocated without monetary transfers and each agent has a unit demand, we use Arrovian efficiency as the notion of welfare optimization and show that a mechanism is individually strategy-proof and Arrovian efficient, i.e., it always selects the best outcome with respect to some Arrovian social welfare function, if and only if the mechanism is group strategy-proof and Pareto efficient. If the Arrovian social welfare function completely ranks all matchings, then the individually strategy-proof and Arrovian-efficient mechanisms are almost sequential dictatorships. Series: Boston College Working Papers in Economics Number: 916 Creation-Date: 20160824 Keywords: Individual strategy-proofness, group strategy-proofness, Pareto efficiency, Arrovian preference aggregation, matching, no-transfer allocation and exchange Classification-JEL: C78, D78 File-URL: http://fmwww.bc.edu/EC-P/wp916.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:916 Template-Type: ReDIF-Paper 1.0 Title: Bond Market Exposures to Macroeconomic and Monetary Policy Risks Author-Name: Dongho Song Author-X-Name-First: Dongho Author-X-Name-Last: Song Author-Person: pso450 Author-Email: dongho.song@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: The paper estimates a model that allows for shifts in the aggressiveness of monetary policy and time variation in the distribution of macroeconomic shocks. These model features induce variations in the cyclical properties of inflation and the riskiness of bonds. The estimation identifies inflation as procyclical from the late 1990s, when the economy shifted toward aggressive monetary policy and experienced procyclical macroeconomics shocks. Since bonds hedge stock market risks when inflation is procylical, the stock-bond return correlation turned negative in the late 1990s. The risks of encountering countercyclical inflation in the future could lead to an upward-sloping yield curve, like in the data. Classification-JEL: E32, E42, E43, E44, E52, G12 Keywords: bond market, inflation, monetary policy Series: Boston College Working Papers in Economics Number: 915 Creation-Date: 20160525 Revision-Date: 20160719 File-URL: http://fmwww.bc.edu/EC-P/wp915.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:915 Template-Type: ReDIF-Paper 1.0 Title: Co-authorship and Academic Productivity in Economics: Interaction Maps from the Complex Networks Approach Author-Name: José Alberto Molina Author-X-Name-First: José Author-X-Name-Last: Molina Author-Workplace-Name: Departamento de Análisis Económico, Facultad de Economía y Empresa, Universidad de Zaragoza Author-Workplace-Name: IZA Author-Email: jamolina@unizar.es Author-Person: pmo697 Author-Name: Alberto Alcolea Author-X-Name-First: Alberto Author-X-Name-Last: Alcolea Author-WorkPlace-Name: Kampal Data Solutions S.L. Author-Name: Alfredo Ferrer Author-X-Name-First: Alfredo Author-X-Name-Last: Ferrer Author-WorkPlace-Name: Instituto de Biocomputación y Fisica de Sistemas Complejos (BIFI), Zaragoza Author-Name: Alberto Alcolea Author-X-Name-First: Alberto Author-X-Name-Last: Alcolea Author-WorkPlace-Name: Kampal Data Solutions S.L. Author-Name: David Iñiguez Author-X-Name-First: David Author-X-Name-Last: Iñiguez Author-WorkPlace-Name: Fundación ARAID, Diputación General de Aragón, Zaragoza Author-Name: Alejandro Rivero Author-X-Name-First: Alejandro Author-X-Name-Last: Rivero Author-WorkPlace-Name: Instituto de Biocomputación y Fisica de Sistemas Complejos (BIFI), Zaragoza Author-Name: Gonzalo Ruiz Author-X-Name-First: Gonzalo Author-X-Name-Last: Ruiz Author-WorkPlace-Name: Instituto de Biocomputación y Fisica de Sistemas Complejos (BIFI), Zaragoza Author-Name: Alfonso Tarancón Author-X-Name-First: Alfonso Author-X-Name-Last: Tarancón Author-WorkPlace-Name: Departamento de Física Teórica, Facultad de Ciencias, Universidad de Zaragoza Abstract: We explore the relationship between collaborations in writing papers and the academic productivity of economists and, particularly, we describe the magnitude and intensity of co-authorship among economists. To that end, we employ interaction maps from Complex Systems methods to study the global properties of specific networks. We use 8,253 JCR papers from ISI-WOK, published by 5,188 economists from Spanish institutions, and their co-authors, up to 8,202 researchers, from 2002 to 2014, to identify and determine the collaborative structure of economics research in Spain, with its primary communities and figures of influence. Our results indicate that centrality and productivity are correlated, particularly with respect to a local estimator of centrality (page rank), and we provide certain recommendations, such as promoting interactions among highly productive authors who have few co-authors with other researchers in their environment, or recommending that authors who may be well-positioned but minimally productive strive to improve their productivity. Keywords: Co-authorship, Academic productivity, Economists, Interaction maps, Complex networks Classification-JEL: A11, C45, C63, D85, I23, Y91 Series: Boston College Working Papers in Economics Number: 914 Creation-Date: 20160601 File-URL: http://fmwww.bc.edu/EC-P/wp914.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:914 Template-Type: ReDIF-Paper 1.0 Title: Targeting Constant Money Growth at the Zero Lower Bound Author-Name: Michael T. Belongia Author-X-Name-First: Michael Author-X-Name-Last: Belongia Author-Workplace-Name: University of Mississippi Author-Name: Peter N. Ireland Author-X-Name-First: Peter Author-X-Name-Last: Ireland Author-Person: pir1 Author-Email: peter.ireland@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: Unconventional policy actions, including quantitative easing and forward guidance, taken by the Federal Reserve during and since the financial crisis and Great Recession of 2007-2009, have been widely interpreted as attempts to influence long-term interest rates after the federal funds rate hit its zero lower bound. Alternatively, similar actions could have been directed at stabilizing the growth rate of a monetary aggregate, so as to maintain a more consistent level of policy accommodation in the face of severe disruptions to the financial sector and the economy at large. This paper bridges the gap between these two views, by developing a structural vector autoregression that uses information contained in both interest rates and a Divisia monetary aggregate to infer the stance of Federal Reserve policy and to gauge its effects on aggregate output and prices. Counterfactual simulations from the SVAR suggest that targeting money growth at the zero lower bound would not only have been feasible, but would also have supported a stronger and more rapid economic recovery since 2010. Classification-JEL: E31, E32, E37, E41, E43, E47, E51, E52, E65 Keywords: Constant money growth rate rules, Divisia monetary aggregates, Quantitative easing, Structural vector autoregressions, Zero lower bound Series: Boston College Working Papers in Economics Number: 913 Creation-Date: 20160525 File-URL: http://fmwww.bc.edu/EC-P/wp913.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:913 Template-Type: ReDIF-Paper 1.0 Title: Preferences and Social Influence Author-Name: Chaim Fershtman Author-X-Name-First: Chaim Author-X-Name-Last: Fershtman Author-Workplace-Name: Tel Aviv University Author-Email: fersht@post.tau.ac.il Author-Name: Uzi Segal Author-X-Name-First: Uzi Author-X-Name-Last: Segal Author-Person: pse40 Author-Email: uzi.segal@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Series: Boston College Working Papers in Economics Number: 912 Abstract: Interaction between decision makers may affect their preferences. We consider a setup in which each individual is characterized by two sets of preferences: his unchanged core preferences and his behavioral preferences. Each individual has a social influence function that determines his behavioral preferences given his core preferences and the behavioral preferences of other individuals in his group. Decisions are made according to behavioral preferences. The paper considers different properties of these social influence functions and their effect on equilibrium behavior. We illustrate the applicability of our model by considering decision making by a committee that has a deliberation stage prior to voting. Creation-Date: 20160520 Classification-JEL: D81 Publication-Status: Published, American Economic Journal: Microeconomics, 2018, 10(3):124-142. Keywords: Risk aversion, social influence, behavioral preferences File-URL: http://fmwww.bc.edu/EC-P/wp912.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:912 Template-Type: ReDIF-Paper 1.0 Title: Circumventing the Zero Lower Bound with Monetary Policy Rules Based on Money Author-Name: Michael T. Belongia Author-X-Name-First: Michael Author-X-Name-Last: Belongia Author-Workplace-Name: University of Mississippi Author-Name: Peter N. Ireland Author-X-Name-First: Peter Author-X-Name-Last: Ireland Author-Person: pir1 Author-Email: peter.ireland@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: Discussions of monetary policy rules after the 2008-2009 recession highlight the potential impotence of a central bank's actions when the short-term interest rate under its control is limited by the zero lower bound. This perspective assumes, in a manner consistent with the canonical New Keynesian model, that the quantity of money has no role to play in transmitting a central bank's actions to economic activity. This paper examines the validity of this claim and investigates the properties of alternative monetary policy rules based on control of the monetary base or a monetary aggregate in lieu of a short-term interest rate. The results indicate that rules of this type have the potential to guide monetary policy decisions toward the achievement of a long run nominal goal without being constrained by the zero lower bound on a nominal interest rate. They suggest, in particular, that by exerting its influence over the monetary base or a broader aggregate, the Federal Reserve could more effectively stabilize nominal income around a long-run target path, even in a low or zero interest-rate environment. Classification-JEL: E31, E32, E37, E42, E51, E52, E58 Keywords: Adjusted monetary base, Divisia monetary aggregates, Monetary policy rules, Nominal income targeting, Zero lower bound Series: Boston College Working Papers in Economics Number: 911 Creation-Date: 20160501 File-URL: http://fmwww.bc.edu/EC-P/wp911.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:911 Template-Type: ReDIF-Paper 1.0 Title: Should Central Banks Target Investment Prices? Author-Name: Susanto Basu Author-X-Name-First: Susanto Author-X-Name-Last: Basu Author-Person: pba274 Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-WorkPlace-Name: NBER Author-Name: Pierre De Leo Author-X-Name-First: Pierre Author-X-Name-Last: De Leo Author-Email: deleop@bc.edu Author-WorkPlace-Name: Boston College Abstract: Central banks nearly always state explicit or implicit inflation targets in terms of consumer price inflation. If there are nominal rigidities in the pricing of both consumption and investment goods and if the shocks to the two sectors are not identical, then monetary policy cannot stabilize inflation and output gaps in both sectors. Thus, the central bank faces a tradeoff between targeting consumption price inflation and investment price inflation. In this setting, ignoring investment prices typically leads to substantial welfare losses because the intertemporal elasticity of substitution in investment is much higher than in consumption. In our calibrated model, consumer price targeting leads to welfare losses that are at least three times the loss under optimal policy. A simple rule that puts equal weight on stabilizing consumption and investment price inflation comes close to replicating the optimal policy. Thus, GDP deflator targeting is not a good approximation to optimal policy. A shift in monetary policy to targeting a weighted average of consumer and investment price inflation may produce significant welfare gains, although this would constitute a major change in current central banking practice. Series: Boston College Working Papers in Economics Number: 910 Creation-Date: 20160325 Revision-Date: 20170504 Keywords: Inflation Targeting; Investment-Specific Technical Change; Investment Price Rigidity; Optimal Monetary Policy Classification-JEL: E52; E58; E32; E31 File-URL: http://fmwww.bc.edu/EC-P/wp910.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:910 Template-Type: ReDIF-Paper 1.0 Title: International Geopolitics Author-Name: Ben Li Author-X-Name-First: Ben Author-X-Name-Last: Li Author-Person: pli448 Author-Email: ben.li@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Penglong Zhang Author-X-Name-First: Penglong Author-X-Name-Last: Zhang Author-Workplace-Name: Boston College Abstract: Since the Age of Discovery, the world has grown integrated economically while remaining disintegrated politically as a collection of nation-states. The nation-state system is robust because borders, as state dividers, interact with economic integration to absorb shocks. We build a tractable general equilibrium model of international trade and national borders in the world. Over a longer time horizon, declining trade costs alter trade volumes across states but also incentivize states to redraw borders, causing states to form, change, and dissolve. Our model offers significant implications for the global economy and politics, including trade patterns, political geography, its interplay with natural geography, state-size distribution, and the risks of militarized disputes. These implications are supported by modern and historical data. Classification-JEL: N40, F50 Keywords: nation-state, endogenous borders, militarized disputes, trade costs Note: Previously circulated as "Trade and Geopolitics" Series: Boston College Working Papers in Economics Number: 909 Creation-Date: 20160315 Revision-Date: 20170206 File-URL: http://fmwww.bc.edu/EC-P/wp909.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:909 Template-Type: ReDIF-Paper 1.0 Title: Empirical Evidence on Conditional Pricing Practices Author-Name: Bogdan Genchev Author-X-Name-First: Bogdan Author-X-Name-Last: Genchev Author-Email: bogdan.genchev@bc.edu Author-WorkPlace-Name: Boston College Author-Name: Julie Holland Mortimer Author-X-Name-First: Julie Author-X-Name-Last: Mortimer Author-Person: pmo678 Author-Email: julie.mortimer.2@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Series: Boston College Working Papers in Economics Number: 908 Abstract: Conditional pricing practices allow the terms of sale between a producer and a downstream distributor to vary with the ability of the downstream firm to meet a set of conditions put forward by the producer. The conditions may require a downstream firm to accept minimum quantities or multiple products, to adhere to minimum market-share requirements, or even to deal exclusively with one producer. The form of payment from the producer to the downstream firm may take the form of a rebate, marketing support, or simply the willingness to supply inventory. The use of conditional pricing practices is widespread throughout many industries, and the variety of contractual forms used in these arrangements is nearly as extensive as the number of contracts. Creation-Date: 20160215 Classification-JEL: K11, K21, L4, L42 Keywords: conditional pricing, terms of sale, downstream firm Publication-Status: published, Anti-trust Law Journal, Vol 81, No 2 (2017): 343-370 File-URL: http://fmwww.bc.edu/EC-P/wp908.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:908 Template-Type: ReDIF-Paper 1.0 Title: Copyright Enforcement: Evidence from Two Field Experiments Author-Name: Hong Luo Author-X-Name-First: Hong Author-X-Name-Last: Luo Author-Email: hluo@hbs.edu Author-WorkPlace-Name: Harvard Business School Author-Name: Julie Holland Mortimer Author-X-Name-First: Julie Author-X-Name-Last: Mortimer Author-Person: pmo678 Author-Email: julie.mortimer.2@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Series: Boston College Working Papers in Economics Number: 907 Abstract: Effective dispute resolution is important for reducing private and social costs. We study how resolution responds to changes in price and communication using a new, extensive dataset of copyright infringement incidences by firms. The data cover two field experiments run by a large stock-photography agency. We find that substantially reducing the requested amount generates a small increase in the settlement rate. However, for the same reduced request, a message informing infringers of the price reduction and acknowledging possible unintentionality generates a large increase in settlement; including a deadline further increases the response. The small price effect, compared to the large message effect, can be explained by two countervailing effects of a lower price: an inducement to settle early, but a lower threat of escalation. Furthermore, acknowledging possible unintentionality may encourage settlement due to the typically inadvertent nature of these incidences. The resulting higher settlement rate prevents additional legal action and reduces social costs. Creation-Date: 20160219 Classification-JEL: L0, M2, O30, O34, K41, K42 Keywords: copyright, intellectual property, dispute resolution Publication-Status: Published, Journal of Economics and Management Strategy, Vol 26, Issue 2 (2017): 499-528. File-URL: http://fmwww.bc.edu/EC-P/wp907.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:907 Template-Type: ReDIF-Paper 1.0 Title: Explicit vs. Statistical Preferential Treatment in Affirmative Action: Theory and Evidence from Chicago’s Exam Schools Author-Name: Umut Mert Dur Author-X-Name-First: Umut Author-X-Name-Last: Dur Author-Email: umutdur@gmail.com Author-WorkPlace-Name: North Carolina State University Author-Name: Parag A. Pathak Author-X-Name-First: Parag Author-X-Name-Last: Pathak Author-Workplace-Name: MIT Author-Name: Tayfun Sönmez Author-X-Name-First: Tayfun Author-X-Name-Last: Sönmez Author-Email: sonmezt@bc.edu Author-Person: psi57 Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Series: Boston College Working Papers in Economics Number: 906 Creation-Date: 20160301 Abstract: Affirmative action schemes must confront the tension between admitting the highest scoring applicants and ensuring diversity. In Chicago’s affirmative action system for exam schools, applicants are divided into one of four socioeconomic tiers based on the characteristics of their neighborhood. Applicants can be admitted to a school either through a slot reserved for their tier or through a merit slot. Equity considerations motivate equal percentage reserves for each tier, but there is a large debate on the total size of these reserve slots relative to merit slots. An issue that has received much less attention is the order in which slots are processed. Since the competition for merit slots is influenced directly by the allocation to tier slots, equal size reserves are not sufficient to eliminate explicit preferential treatment. We characterize processing rules that are tier-blind. While explicit preferential treatment is ruled out under tier-blind rules, it is still possible to favor certain tiers, by ex- ploiting the distribution of scores across tiers, a phenomenon we call statistical preferential treatment. We characterize the processing order that is optimal for the most disadvantaged tier assuming that these applicants systematically have lower scores. This policy processes merit slots prior to any slots reserved for tiers. Our main result implies that Chicago has been providing an additional boost to the disadvantaged tier beyond their reserved slots. Using data from Chicago, we show that the bias due to processing order for the disadvantaged tier is comparable to that from the 2012 decrease in the size of the merit reserve. Keywords: School Choice, Affirmative Action Classification-JEL: D47 File-URL: http://fmwww.bc.edu/EC-P/wp906.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:906 Template-Type: ReDIF-Paper 1.0 Title: The effect of kinship on intergenerational cooperation: A lab experiment with three generations Author-Name: José Alberto Molina Author-X-Name-First: José Author-X-Name-Last: Molina Author-WorkPlace-Name: University of Zaragoza Author-Email: jamolina@unizar.es Author-Person: pmo697 Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Alfredo Ferrer Author-X-Name-First: Alfredo Author-X-Name-Last: Ferrer Author-WorkPlace-Name: University of Zaragoza Author-Name: José Ignacio Gimenez-Nadal Author-X-Name-First: José Author-X-Name-Last: Gimenez-Nadal Author-Person: pgi103 Author-Email: ngimenez@unizar.es Author-WorkPlace-Name: University of Zaragoza Author-Name: Carlos Gracia-Lazaro Author-X-Name-First: Carlos Author-X-Name-Last: Gracia-Lazaro Author-WorkPlace-Name: University of Zaragoza Author-Name: Yamir Moreno Author-X-Name-First: Yamir Author-X-Name-Last: Moreno Author-WorkPlace-Name: University of Zaragoza Author-Name: Angel Sanchez Author-X-Name-First: Angel Author-X-Name-Last: Sanchez Author-WorkPlace-Name: University of Zaragoza Abstract: In this paper, we analyze how kinship among family members affects intergenerational cooperation in a public good game. 165 individuals from 55 families, comprising three generations (youths, parents, and grandparents), play a public good game in three different treatments: one in which three members of the same family play each other (family), a second with the youth and two non-family members but preserving the previous generational structure (intergenerational), and a third in which three randomly-selected players play each other (random). We find that players contribute more to the public good when they play with other family members, than when they play with non-family members. This effect is present in all three generations, and is independent of the gender of the players. We also observe the significant result that older generations contribute more to the public good, relative to their children. Classification-JEL: D03, D64, D70 Keywords: Intergenerational cooperation, Evolutionary game theory, Public Goods game, Kinship, Social networks Series: Boston College Working Papers in Economics Number: 905 Creation-Date: 20160301 File-URL: http://fmwww.bc.edu/EC-P/wp905.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:905 Template-Type: ReDIF-Paper 1.0 Title: Mothers, Peers and Gender Identity Author-Name: Claudia Olivetti Author-X-Name-First: Claudia Author-X-Name-Last: Olivetti Author-Person: pol63 Author-Email: claudia.olivetti@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-WorkPlace-Name: NBER Author-Name: Eleonora Patacchini Author-X-Name-First: Eleonora Author-X-Name-Last: Patacchini Author-WorkPlace-Name: Cornell University Author-WorkPlace-Name: IZA Author-Workplace-Name: EIEF Author-Workplace-Name: CEPR Author-Email: ep454@cornell.edu Author-Name: Yves Zenou Author-X-Name-First: Yves Author-X-Name-Last: Zenou Author-WorkPlace-Name: Monash University Author-WorkPlace-Name: IFN Author-Workplace-Name: CEPR Author-Email: yves.zenou@monash.edu Abstract: We study whether a woman’s labor supply as a young adult is shaped by the work behavior of her adolescent peers’ mothers. Using detailed information on a sample of U.S. teenagers who are followed over time, we find that labor force participation of high school peers’ mothers affects adult women’s labor force participation, above and beyond the effect of their own mothers. The analysis suggests that women who were exposed to a larger number of working mothers during adolescence are less likely to feel that work interferes with family responsibilities. This perception, in turn, is important for whether they work when they have children. Classification-JEL: J22, Z13 Keywords: Role models, identity, female labor supply, peer effects, work-family conflict Publication-Status: forthcoming, Journal of the European Economic Association Note: Previously circulated as NBER WP 19610. Series: Boston College Working Papers in Economics Number: 904 Creation-Date: 20180812 File-URL: http://fmwww.bc.edu/EC-P/wp904.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:904 Template-Type: ReDIF-Paper 1.0 Title: Three-generation Mobility in the United States, 1850-1940: The Role of Maternal and Paternal Grandparents Author-Name: Claudia Olivetti Author-X-Name-First: Claudia Author-X-Name-Last: Olivetti Author-Person: pol63 Author-Email: claudia.olivetti@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-WorkPlace-Name: NBER Author-Name: M. Daniele Paserman Author-X-Name-First: Daniele Author-X-Name-Last: Paserman Author-WorkPlace-Name: Boston University Author-WorkPlace-Name: NBER Author-Name: Laura Salisbury Author-X-Name-First: Laura Author-X-Name-Last: Salisbury Author-WorkPlace-Name: York University Author-WorkPlace-Name: NBER Abstract: This paper estimates intergenerational elasticities across three generations in the United States in the late 19th and early 20th centuries. We extend the methodology in Olivetti and Paserman (2015) to explore the role of maternal and paternal grandfathers for the transmission of economic status to grandsons and granddaughters. We document three main findings. First, grandfathers matter for income transmission, above and beyond their effect on fathers’ income. Second, the socio-economic status of grandsons is influenced more strongly by paternal grandfathers than by maternal grand- fathers. Third, maternal grandfathers are more important for granddaughters than for grandsons, while the opposite is true for paternal grandfathers. We present a model of multi-trait matching and inheritance that can rationalize these findings. Classification-JEL: J62, J12 Keywords: Intergenerational Mobility, Multiple Generations, Gender, Marriage, Assortative Mating Series: Boston College Working Papers in Economics Number: 903 Creation-Date: 20160101 File-URL: http://fmwww.bc.edu/EC-P/wp903.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:903 Template-Type: ReDIF-Paper 1.0 Title: Social Norms, Labor Market Opportunities, and the Marriage Gap for Skilled Women Author-Name: Marianne Bertrand Author-X-Name-First: Marianne Author-X-Name-Last: Bertrand Author-Workplace-Name: Booth School of Business, University of Chicago Author-Email: marianne.bertrand@chicagobooth.edu Author-Name: Patricia Cortés Author-X-Name-First: Patricia Author-X-Name-Last: Cortés Author-Workplace-Name: Questrom School of Business, Boston University Author-Email: pcortes@bu.edu Author-Name: Claudia Olivetti Author-X-Name-First: Claudia Author-X-Name-Last: Olivetti Author-Person: pol63 Author-Email: claudia.olivetti@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-WorkPlace-Name: NBER Author-Name: Jessica Pan Author-X-Name-First: Jessica Author-X-Name-Last: Pan Author-Workplace-Name: National University of Singapore Author-Email: jesspan@nus.edu.sg Abstract: In most of the developed world, skilled women marry at a lower rate than unskilled women. We document heterogeneity across countries in how the marriage gap for skilled women has evolved over time. As labor market opportunities for women have improved, the marriage gap has been growing in some countries but shrinking in others. We discuss a theoretical model in which the (negative) social attitudes towards working women might contribute towards the lower marriage rate of skilled women, and might also induce a non-linear relationship between their labor market prospects and their marriage outcomes. The model is suited to understand the dynamics of the marriage gap for skilled women over time within a country with set social attitudes towards working women. The model also delivers predictions about how the marriage gap for skilled women should react to changes in their labor market opportunities across countries with more or less conservative attitudes towards working women. We test the key predictions of this model in a panel of 23 developed countries, as well as in a panel of US states. Classification-JEL: J11, J12, J16 Keywords: Marriage, Social Norms, Gender Series: Boston College Working Papers in Economics Number: 902 Creation-Date: 20160203 File-URL: http://fmwww.bc.edu/EC-P/wp902.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:902 Template-Type: ReDIF-Paper 1.0 Title: Bank Quality, Judicial Efficiency and Loan Repayment Delays in Italy Author-Name: Fabio Schiantarelli Author-X-Name-First: Fabio Author-X-Name-Last: Schiantarelli Author-Email: schianta@bc.edu Author-Person: psc8 Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Workplace-Name: IZA Author-Name: Massimiliano Stacchini Author-X-Name-First: Massimiliano Author-X-Name-Last: Stacchini Author-WorkPlace-Name: Bank of Italy Author-Name: Philip E. Strahan Author-X-Name-First: Philip Author-X-Name-Last: Strahan Author-WorkPlace-Name: Boston College Author-Workplace-Name: NBER Abstract: Exposure to liquidity risk makes banks vulnerable to runs from both depositors and from wholesale, short-term investors. This paper shows empirically that banks are also vulnerable to run-like behavior from borrowers who delay their loan repayments (default). Firms in Italy defaulted more against banks with high levels of past losses. We control for borrower fundamentals with firm-quarter fixed effects; thus, identification comes from a firm’s choice to default against one bank versus another, depending upon their health. This ‘selective’ default increases where legal enforcement is weak. Poor enforcement thus can create a systematic loan risk by encouraging borrowers to default en masse once the continuation value of their bank relationships comes into doubt. Series: Boston College Working Papers in Economics Number: 901 Creation-Date: 20160215 Revision-Date: 20190901 Publication-Status: forthcoming, Journal of Finance Keywords: liquidity risk, bank runs, bank loans Classification-JEL: G0, G3, K0, K2 File-URL: http://fmwww.bc.edu/EC-P/wp901.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:901 Template-Type: ReDIF-Paper 1.0 Title: How (Not) to Integrate Blood Subtyping Technology to Kidney Exchange Author-Name: Tayfun Sönmez Author-X-Name-First: Tayfun Author-X-Name-Last: Sönmez Author-Email: sonmezt@bc.edu Author-Person: psi57 Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: M. Utku Ünver Author-X-Name-First: M. Author-X-Name-Last: Ünver Author-Person: pun2 Author-Workplace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Özgür Yilmaz Author-X-Name-First: Özgür Author-X-Name-Last: Yilmaz Author-Workplace-Name: Koç University Series: Boston College Working Papers in Economics Number: 900 Creation-Date: 20160115 Revision-Date: 20171015 Abstract: Even though kidney exchange became an important source of kidney transplants over the last decade with the introduction of market design techniques to organ transplantation, the shortage of kidneys for transplantation is greater than ever. Due to biological disadvantages, patient populations of blood types B/O are disproportionately hurt by this increasing shortage. The disadvantaged blood types are overrepresented among minorities in the US. In order to mitigate the disproportionate harm to these biologically disadvantaged groups, the UNOS reformed in 2014 the US deceased-donor kidney-allocation system, utilizing a technological advance in blood typing. The improved technology allows a certain fraction of blood type A kidneys, referred to as subtype A2 kidneys, to be transplanted to medically qualified patients of blood types B/O. The recent reform prioritizes subtype A2 deceased-donor kidneys for blood type B patients only. When restricted to the deceased-donor allocation system, this is merely a distributional reform with no adverse impact on the overall welfare of the patient population. In this paper we show that the current implementation of the reform has an unintended consequence, and it de facto extends the preferential allocation to kidney exchange as well. Ironically this “spillover” not only reduces the number of living-donor transplants for the overall patient population, but also for the biologically disadvantaged groups who are the intended beneficiaries of the reform. We show that minor variations of the current policy do not suffer from this unintended consequence, and we make two easy-to-implement, welfare-increasing policy recommendations. Keywords: Market design, matching, kidney exchange Classification-JEL: C71, C78, D02, D47, D63, I10 File-URL: http://fmwww.bc.edu/EC-P/wp900.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:900 Template-Type: ReDIF-Paper 1.0 Title: Testing for Monotonicity in Unobservables under Unconfoundedness Author-Name: Stefan Hoderlein Author-X-Name-First: Stefan Author-X-Name-Last: Hoderlein Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Person: pho119 Author-Name: Liangjun Su Author-X-Name-First: Liangjun Author-X-Name-Last: Su Author-Workplace-Name: Singapore Management University Author-Name: Halbert White Author-X-Name-First: Halbert Author-X-Name-Last: White Author-Person: pwh17 Author-Name: Thomas Tao Yang Author-Workplace-Name: Boston College Abstract: Monotonicity in a scalar unobservable is a common assumption when modeling heterogeneity in structural models. Among other things, it allows one to recover the underlying structural function from certain conditional quantiles of observables. Nevertheless, monotonicity is a strong assumption and in some economic applications unlikely to hold, e.g., random coefficient models. Its failure can have substantive adverse consequences, in particular inconsistency of any estimator that is based on it. Having a test for this hypothesis is hence desirable. This paper provides such a test for cross-section data. We show how to exploit an exclusion restriction together with a conditional independence assumption, which in the binary treatment literature is commonly called unconfoundedness, to construct a test. Our statistic is asymptotically normal under local alternatives and consistent against global alternatives. Monte Carlo experiments show that a suitable bootstrap procedure yields tests with reasonable level behavior and useful power. We apply our test to study the role of unobserved ability in determining Black-White wage differences and to study whether Engel curves are monotonically driven by a scalar unobservable. Keywords: Control variables, Conditional exogeneity, Endogenous variables, Monotonicity, Nonparametrics, Nonseparable, Specification test, Unobserved heterogeneity Classification-JEL: C12, C14, C21, C26 Series: Boston College Working Papers in Economics Number: 899 Creation-Date: 20151023 File-URL: http://fmwww.bc.edu/EC-P/wp899.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:899 Template-Type: ReDIF-Paper 1.0 Title: Constrained Information Processing and Individual Income Expectations Author-Name: Daniel Gutknecht Author-X-Name-First: Daniel Author-X-Name-Last: Gutknecht Author-Workplace-Name: Mannheim University Author-Name: Stefan Hoderlein Author-X-Name-First: Stefan Author-X-Name-Last: Hoderlein Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Person: pho119 Author-Name: Michael Peters Author-X-Name-First: Michael Author-X-Name-Last: Peters Author-WorkPlace-Name: Yale University Author-Person: pwh17 Abstract: Do individuals use all information at their disposal when forming expectations about future events? In this paper we present an econometric framework to answer this question. We show how individual information sets can be characterized by simple nonparametric exclusion restrictions and provide a quantile based test for constrained information processing. In particular, our methodology does not require individuals’ expectations to be rational, and we explicitly allow for individuals to have access to sources of information which the econometrician cannot observe. As an application, we use microdata on individual income expectations to study which information agents employ when forecasting future earnings. Consistent with models where information processing is limited, we find that individuals’ information sets are coarse in that valuable information is discarded. We then quantify the utility costs of coarse information within a standard consumption life-cycle model. Consumers would be willing to pay 0.04% of their permanent income to incorporate the econometrician’s information set in their forecasts. Keywords: Classification-JEL: Series: Boston College Working Papers in Economics Number: 898 Creation-Date: 20160201 File-URL: http://fmwww.bc.edu/EC-P/wp898.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:898 Template-Type: ReDIF-Paper 1.0 Title: Nonparametric Specification Testing in Random Parameter Models Author-Name: Christoph Breunig Author-X-Name-First: Christoph Author-X-Name-Last: Breunig Author-workplace-name: Humboldt-Universität zu Berlin Author-Name: Stefan Hoderlein Author-X-Name-First: Stefan Author-X-Name-Last: Hoderlein Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Person: pho119 Abstract: In this paper, we suggest and analyze a new class of specification tests for random coefficient models. These tests allow to assess the validity of central structural features of the model, in particular linearity in coefficients and generalizations of this notion like a known nonlinear functional relationship. They also allow to test for degeneracy of the distribution of a random coefficient, i.e., whether a coefficient is fixed or random, including whether an associated variable can be omitted altogether. Our tests are nonparametric in nature, and use sieve estimators of the characteristic function. We analyze their power against both global and local alternatives in large samples and through a Monte Carlo simulation study. Finally, we apply our framework to analyze the specification in a heterogeneous random coefficients consumer demand model. Keywords: Nonparametric specification testing, random coefficients, unobserved heterogeneity, sieve method, characteristic function, consumer demand Classification-JEL: C12, C14 Series: Boston College Working Papers in Economics Number: 897 Creation-Date: 20160207 File-URL: http://fmwww.bc.edu/EC-P/wp897.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:897 Template-Type: ReDIF-Paper 1.0 Title: Erratum regarding “Instrumental variables with unrestricted heterogeneity and continuous treatment” Author-Name: Stefan Hoderlein Author-X-Name-First: Stefan Author-X-Name-Last: Hoderlein Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Person: pho119 Author-Name: Hajo Holzmann Author-X-Name-First: Hajo Author-X-Name-Last: Holzmann Author-Workplace-Name: Marburg University Author-Name: Maximilian Kasy Author-X-Name-First: Maximilian Author-X-Name-Last: Kasy Author-Name: Alexander Meister Author-X-Name-First: Alexander Author-X-Name-Last: Meister Author-Workplace-Name: University of Rostock Series: Boston College Working Papers in Economics Number: 896 Creation-Date: 20150718 Revision-Date: 20160201 File-URL: http://fmwww.bc.edu/EC-P/wp896.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:896 Template-Type: ReDIF-Paper 1.0 Title: Semiparametric Estimation of Random Coefficients in Structural Economic Models Author-Name: Stefan Hoderlein Author-X-Name-First: Stefan Author-X-Name-Last: Hoderlein Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Person: pho119 Author-Name: Lars Nesheim Author-X-Name-First: Lars Author-X-Name-Last: Nesheim Author-WorkPlace-Name: University College London Author-Name: Anna Simoni Author-X-Name-First: Anna Author-X-Name-Last: Simoni Author-WorkPlace-Name: CNRS - CREST Abstract: This paper discusses nonparametric estimation of the distribution of random coefficients in a structural model that is nonlinear in the random coefficients. We establish that the problem of recovering the probability density function (pdf ) of random parameters falls into the class of convexly-constrained inverse problems. The framework offers an estimation method that separates computational solution of the structural model from estimation. We first discuss nonparametric identification. Then, we propose two alternative estimation procedures to estimate the density and derive their asymptotic properties. Our general framework allows us to deal with unobservable nuisance variables, e.g., measurement error, but also covers the case when there are no such nuisance variables. Finally, Monte Carlo experiments for several structural models are provided which illustrate the performance of our estimation procedure. Keywords: Nonlinear random coefficients, mixture models, structural models, heterogeneity, inverse problems Classification-JEL: Series: Boston College Working Papers in Economics Number: 895 Creation-Date: 20150414 Revision-Date: 20160201 File-URL: http://fmwww.bc.edu/EC-P/wp895.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:895 Template-Type: ReDIF-Paper 1.0 Title: The Triangular Model with Random Coefficients Author-Name: Stefan Hoderlein Author-X-Name-First: Stefan Author-X-Name-Last: Hoderlein Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Person: pho119 Author-Name: Hajo Holzmann Author-X-Name-First: Hajo Author-X-Name-Last: Holzmann Author-Workplace-Name: Marburg University Author-Name: Alexander Meister Author-X-Name-First: Alexander Author-X-Name-Last: Meister Author-Workplace-Name: University of Rostock Abstract: The triangular model is a very popular way to capture endogeneity. In this model, an outcome is determined by an endogenous regressor, which in turn is caused by an instrument in a first stage. In this paper, we study the triangular model with random coefficients and exogenous regressors in both equations. We establish a profound non-identification result: the joint distribution of the random coefficients is not identified, implying that counterfactual outcomes are also not identified in general. This result continues to hold, if we confine ourselves to the joint distribution of coefficients in the outcome equation or any marginal, except the one on the endogenous regressor. Identification continues to fail, even if we focus on means of random coefficients (implying that IV is generally biased), or let the instrument enter the first stage in a monotonic fashion. Based on this insight, we derive bounds on the joint distribution of random parameters, and suggest an additional restriction that allows to point identify the distribution of random coefficients in the outcome equation. We extend this framework to cover the case where the regressors and instruments have limited support, and analyze semi- and nonparametric sample counterpart estimators in finite and large samples. Finally, we give an application of the framework to consumer demand. Keywords: Random Coefficients, Endogeneity, Nonparametric, Identification, Radon Transform, Demand Classification-JEL: Series: Boston College Working Papers in Economics Number: 894 Creation-Date: 20150624 Revision-Date: 20160201 File-URL: http://fmwww.bc.edu/EC-P/wp894.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:894 Template-Type: ReDIF-Paper 1.0 Title: Estimating the Distribution of Welfare Effects Using Quantiles Author-Name: Stefan Hoderlein Author-X-Name-First: Stefan Author-X-Name-Last: Hoderlein Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Person: pho119 Author-Name: Anne Vanhems Author-X-Name-First: Anne Author-X-Name-Last: Vanhems Author-workplace-name: University of Toulouse Abstract: This paper proposes a framework to model empirically welfare effects that are associated with a price change in a population of heterogeneous consumers which is similar to Hausman and Newey (1995), but allows for more general forms of heterogeneity. Individual demands are characterized by a general model which is nonparametric in the regressors, as well as monotonic in unobserved heterogeneity. In this setup, we first provide and discuss conditions under which the heterogeneous welfare effects are identified, and establish constructive identification. We then propose a sample counterpart estimator, and analyze its large sample properties. For both identification and estimation, we distinguish between the cases when regressors are exogenous and when they are endogenous. Finally, we apply all concepts to measuring the heterogeneous effect of a chance of gasoline price using US consumer data and find very substantial differences in individual effects across quantiles. Keywords: Welfare, Consumer Surplus, Price Effect, Nonparametric, Quantile, Endogeneity, Compensating Variation Classification-JEL: Series: Boston College Working Papers in Economics Number: 893 Creation-Date: 20130910 Revision-Date: 20160201 File-URL: http://fmwww.bc.edu/EC-P/wp893.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:893 Template-Type: ReDIF-Paper 1.0 Title: Testing Monotonicity in Unobservables with Panel Data Author-Name: Liangjun Su Author-X-Name-First: Liangjun Author-X-Name-Last: Su Author-Workplace-Name: Singapore Management University Author-Name: Stefan Hoderlein Author-X-Name-First: Stefan Author-X-Name-Last: Hoderlein Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Person: pho119 Author-Name: Halbert White Author-X-Name-First: Halbert Author-X-Name-Last: White Author-Person: pwh17 Abstract: Monotonicity in a scalar unobservable is a crucial identifying assumption for an important class of nonparametric structural models accommodating unobserved heterogeneity. Tests for this monotonicity have previously been unavailable. This paper proposes and analyzes tests for scalar monotonicity using panel data for structures with and without time-varying unobservables, either partially or fully nonseparable between observables and unobservables. Our nonparametric tests are computationally straightforward, have well behaved limiting distributions under the null, are consistent against pre- cisely specified alternatives, and have standard local power properties. We provide straightforward bootstrap methods for inference. Some Monte Carlo experiments show that, for empirically relevant sample sizes, these reasonably control the level of the test, and that our tests have useful power. We apply our tests to study asset returns and demand for ready-to-eat cereals. Keywords: monotonicity, nonparametric, nonseparable, specification test, unobserved heterogeneity Classification-JEL: C12, C14, C33 Series: Boston College Working Papers in Economics Number: 892 Creation-Date: 20130415 Revision-Date: 20160201 File-URL: http://fmwww.bc.edu/EC-P/wp892.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:892 Template-Type: ReDIF-Paper 1.0 Title: Nonparametric Estimation of Demand Elasticities Using Panel Data Author-Name: Stefan Hoderlein Author-X-Name-First: Stefan Author-X-Name-Last: Hoderlein Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Person: pho119 Author-Name: Matthew Shum Author-X-Name-First: Matthew Author-X-Name-Last: Shum Author-Workplace-Name: Caltech Abstract: In this paper, we propose and implement an estimator for price elasticities in demand models that makes use of Panel data. Our underlying demand model is nonparametric, and accommodates general distributions of product-specific unobservables which can lead to endogeneity of price. Our approach allows these unobservables to vary over time while, at the same time, not requiring the availability of instruments which are orthogonal to these unobservables. Monte Carlo simulations demonstrate that our estimator works remarkably well, even with modest sample sizes. We provide an illustrative application to estimating the cross-price elasticity matrix for carbonated soft drinks. Keywords: demand elasticities, nonparametric estimation Classification-JEL: Series: Boston College Working Papers in Economics Number: 891 Creation-Date: 20140407 Revision-Date: 20160201 File-URL: http://fmwww.bc.edu/EC-P/wp891.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:891 Template-Type: ReDIF-Paper 1.0 Title: Spatial distribution of US employment in an urban wage-efficiency setting Author-Name: José Ignacio Gimenez-Nadal Author-X-Name-First: José Author-X-Name-Last: Gimenez-Nadal Author-Person: pgi103 Author-Email: ngimenez@unizar.es Author-WorkPlace-Name: University of Zaragoza Author-Name: José Alberto Molina Author-X-Name-First: José Author-X-Name-Last: Molina Author-WorkPlace-Name: University of Zaragoza Author-Email: jamolina@unizar.es Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Person: pmo697 Author-Name: Jorge Velilla Author-X-Name-First: Jorge Author-X-Name-Last: Velilla Author-WorkPlace-Name: University of Zaragoza Abstract: In this paper, we analyze the spatial distribution of US employment and earnings against an urban wage-efficiency background, where leisure and effort at work are complementary. Using data from the American Time Use Survey (ATUS) for the period 2003-2014, we analyze the spatial distribution of employment across metropolitan areas. We also empirically study the relationship between individual earnings and commuting and leisure. Our empirical results show that employment is mostly concentrated in metropolitan cores, and that earnings increase with “expected” commuting time, which gives empirical support to our urban wage-efficiency theory. Furthermore, we use Geographical Information System models to show that there is no common pattern of commuting and the employees-to-unemployed rate, although we find higher wages in comparatively crowded states, where average commuting times are also higher. Classification-JEL: J21, J22, J31, R12, R41 Keywords: urban wage-efficiency, earnings, commuting, leisure, American Time Use Survey Series: Boston College Working Papers in Economics Number: 890 Creation-Date: 20160201 File-URL: http://fmwww.bc.edu/EC-P/wp890.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:890 Template-Type: ReDIF-Paper 1.0 Title: The Evolution of Gender Gaps in Industrialized Countries Author-Name: Claudia Olivetti Author-X-Name-First: Claudia Author-X-Name-Last: Olivetti Author-Person: pol63 Author-Email: claudia.olivetti@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-WorkPlace-Name: NBER Author-Name: Barbara Petrongolo Author-X-Name-First: Barbara Author-X-Name-Last: Petrongolo Author-WorkPlace-Name: Queen Mary University Author-WorkPlace-Name: Centre for Economic Performance, LSE Author-Person: ppe484 Abstract: Women in developed economies have made major inroads in labor markets throughout the past century, but remaining gender differences in pay and employment seem remarkably persistent. This paper documents long-run trends in female employment, working hours and relative wages for a wide cross-section of developed economies. It reviews existing work on the factors driving gender convergence, and novel perspectives on remaining gender gaps. The paper finally emphasizes the interplay between gender trends and the evolution of the industry structure. Based on a shift-share decomposition, it shows that the growth in the service share can explain at least half of the overall variation in female hours, both over time and across countries. Classification-JEL: E24, J16, J31 Keywords: gender gaps, demand and supply, industry structure Series: Boston College Working Papers in Economics Number: 889 Creation-Date: 20160101 File-URL: http://fmwww.bc.edu/EC-P/wp889.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:889 Template-Type: ReDIF-Paper 1.0 Title: Equilibrium Price Dispersion and the Border Effect Author-Name: Ryan Chahrour Author-X-Name-First: Ryan Author-X-Name-Last: Chahrour Author-Person: pch1111 Author-Email: ryan.chahrour@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Luminita Stevens Author-X-Name-First: Luminita Author-X-Name-Last: Stevens Author-WorkPlace-Name: University of Maryland Author-Email: stevens@econ.umd.edu. Abstract: We develop a model of equilibrium price dispersion via retailer search and show that the degree of market segmentation within and across countries cannot be separately identified by good-level price data alone. We augment a set of well-known empirical facts about the failure of the law of one price with data on aggregate intranational and international trade quantities, and calibrate the model to match price and quantity facts simultaneously. The calibrated model matches the data very well and implies that within-country markets are strongly segmented, while international borders contribute virtually no additional market segmentation. Classification-JEL: F41, F30, E30 Keywords: Law of one price, Border effect, Real exchange rate Series: Boston College Working Papers in Economics Number: 888 Creation-Date: 20151218 File-URL: http://fmwww.bc.edu/EC-P/wp888.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:888 Template-Type: ReDIF-Paper 1.0 Title: The New World of Retirement Income Security in America Author-Name: Joseph F. Quinn Author-Email: quinnj@bc.edu Author-Person: pqu7 Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Kevin E. Cahill Author-X-Name-First: Kevin Author-X-Name-Last: Cahill Author-Email: cahillkc@bc.edu Author-Workplace-Name: Sloan Center on Aging & Work at Boston College Abstract: We have entered a new world of retirement income security in America, with older individuals more exposed to market risk and more vulnerable to financial insecurity than prior generations. This reflects an evolution that has altered the historical vision of a financially-secure retirement supported by Social Security, a defined-benefit pension plan, and individual savings. Today, two of these three retirement income sources — pensions and savings — are absent or of modest importance for many older Americans. Retirement income security now often requires earnings from continued work later in life, which exacerbates the economic vulnerability of certain segments of the population, including persons with disabilities, the oldest-old, single women, and individuals with intermittent work histories. Because of the unprecedented aging of our society, further changes to the retirement income landscape are inevitable, but policymakers do have options to help protect the financial stability of older Americans. We can begin by promoting savings at all (especially younger) ages and by removing barriers that discourage work later in life. For individuals already on the cusp of retirement, more needs to be done to educate the public about the value of delaying the receipt of Social Security benefits. Inaction now could mean a return to the days when old age and poverty were closely linked. The negative repercussions of this outcome would extend well beyond traditional economic measures, as physical and mental health outcomes are closely tied to financial security. Series: Boston College Working Papers in Economics Number: 887 Creation-Date: 20151201 Keywords: Retirement Income Security, Economics of Aging, Gradual Retirement, Vulnerable Populations, Work and Retirement Classification-JEL: J14, J26, I32, I31, H55, J32 File-URL: http://fmwww.bc.edu/EC-P/wp887.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:887 Template-Type: ReDIF-Paper 1.0 Title: Dual-Donor Organ Exchange Author-Name: Haluk Ergin Author-X-Name-First: Haluk Author-X-Name-Last: Ergin Author-Workplace-Name: University of California, Berkeley Author-Name: Tayfun Sönmez Author-X-Name-First: Tayfun Author-X-Name-Last: Sönmez Author-Email: sonmezt@bc.edu Author-Person: psi57 Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: M. Utku Ünver Author-X-Name-First: M. Author-X-Name-Last: Ünver Author-Person: pun2 Author-Workplace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: Owing to the worldwide shortage of deceased-donor organs for transplantation, living donations have become a significant source of transplant organs. However, not all willing donors can donate to their intended recipients because of medical incompatibilities. These incompatibilities can be overcome by an exchange of donors between patients. For kidneys, such exchanges have become widespread in the last decade with the introduction of optimization and market design techniques to kidney exchange. A small but growing number of liver exchanges have also been conducted. Over the last two decades, a number of transplantation procedures emerged where organs from two living donors are transplanted to a single patient. Prominent examples include dual-graft liver transplantation, lobar lung transplantation, and simultaneous liver-kidney transplantation. Exchange, however, has been neither practiced nor introduced in this context. We introduce dual-donor organ exchange as a novel transplantation modality, and through simulations show that living-donor transplants can be significantly increased through such exchanges. We also provide a simple theoretical model for dual-donor organ exchange and introduce optimal exchange mechanisms under various logistical constraints. Series: Boston College Working Papers in Economics Number: 886 Creation-Date: 20151123 Revision-Date: 20170216 Note: Previously circulated as "Lung Exchange" Keywords: Market Design, Matching, Complementarities, Lung Exchange, Dual-Graft Liver Exchange, Simultaneous Liver-Kidney Exchange Classification-JEL: D47, C78 File-URL: http://fmwww.bc.edu/EC-P/wp886.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:886 Template-Type: ReDIF-Paper 1.0 Author-Name: Christopher F Baum Author-X-Name-First: Christopher Author-X-Name-Last: Baum Author-Person: pba1 Author-Email: baum@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Workplace-Name: DIW Berlin Author-Name: Hans Lööf Author-X-Name-First: Hans Author-X-Name-Last: Lööf Author-Person: plf1 Author-Email: hans.loof@indek.kth.se Author-Workplace-Name: Royal Institute of Technology, Stockholm Author-Name: Pardis Nabavi Author-X-Name-First: Pardis Author-X-Name-Last: Nabavi Author-Person: pna405 Author-Email: pardis.nabavi@indek.kth.se Author-Workplace-Name: Royal Institute of Technology, Stockholm Title: Innovation Strategies, External Knowledge and Productivity Growth Abstract: This paper studies firms’ capability to recombine internal and local knowledge. It measures the outcome in terms of total productivity growth. Using Swedish data on commuting time for face-to-face contacts across all 290 municipalities, we employ a time sensitive approach for calculating localized knowledge within a municipality and and its close neighbors. Internal knowledge is captured by register data on firms’ innovation intensity. The two sources of knowledge are modelled in a production function setting by discrete composite variables with different combinations of input factors. Applying the model on Swedish firm level panel data, we find strong evidence of differences in the capacity to benefit from external knowledge among persistent innovators, temporary innovators and noninnovators. The results are consistent regardless of whether innovation efforts are measured in terms of the frequency of patent applications or the level of R&D investment. Creation-Date: 20151101 Revision-Date: 20171206 File-URL: http://fmwww.bc.edu/EC-P/wp885.pdf File-Format: application/pdf File-Function: main text Classification-JEL: C23, O31, O32 Note: Previously circulated as "Innovation, Spillovers and Productivity Growth: A Dynamic Panel Data Approach" Series: Boston College Working Papers in Economics Number: 885 Keywords: Innovation strategies, localized knowledge, patents, TFP growth, panel data Handle: RePEc:boc:bocoec:885 Template-Type: ReDIF-Paper 1.0 Title: Optimal Fiscal Policy with Labor Selection Author-Name: Sanjay K. Chugh Author-X-Name-First: Sanjay Author-X-Name-Last: Chugh Author-Person: pch1272 Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Wolfgang Lechthalerz Author-Workplace-Name: Kiel Institute for the World Economy Author-Name: Christian Merkl Author-Workplace-Name: Friedrich-Alexander-University Erlangen-Nuremberg Abstract: This paper characterizes long-run and short-run optimal fiscal policy in the labor selection framework. Quantitatively, the time-series volatility of the labor income tax rate is orders of magnitude larger than the "tax-smoothing" results based on Walrasian labor markets, but is a few times smaller than the results based on search and matching labor markets. To understand these results in terms of model primitives, we develop a welfare-relevant analytic concept of externalities for the selection model, which we label "tightness." This concept of tightness is the source of the decentralized economy's inefficient cross-sectional wage premia between the average newly-hired worker and the marginal newly-hired worker. Compared to the traditional concept of labor-market tightness in the search and matching literature, this new concept of tightness plays a highly similar role, and, like in the matching model, is crucial for understanding efficiency and optimal policy. Classification-JEL: E24, E32, E50, E62, E63, J20 Keywords: labor market frictions, hiring costs, efficiency, optimal taxation, labor wedge, zero intertemporal distortions Series: Boston College Working Papers in Economics Number: 884 Creation-Date: 20151025 File-URL: http://fmwww.bc.edu/EC-P/wp884.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:884 Template-Type: ReDIF-Paper 1.0 Title: Long-Term Effects of Access to Health Care: Medical Missions in Colonial India Author-Name: Rossella Calvi Author-X-Name-First: Rossella Author-X-Name-Last: Calvi Author-Workplace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Email: rossella.calvi@bc.edu Author-Person: pca1126 Author-Name: Federico G. Mantovanelli Author-X-Name-First: Federico Author-X-Name-Last: Mantovanelli Author-Email: federico.mantovanelli@analysisgroup.com Author-WorkPlace-Name: The Analysis Group Author-Person: pma639 Abstract: We study the long-term effect of access to health care on individuals' health status by investigating the relationship between the proximity to a Protestant medical mission in colonial India and current health outcomes. We use individuals' anthropometric indicators to measure health status and geocoding tools to calculate the distance between the location of individuals today and Protestant health facilities founded in the nineteenth century. We exploit variation in activities of missionary societies and use an instrumental variable approach to show that proximity to a Protestant medical mission has a causal effect on individuals' health status. We find that a 50 percent reduction in the distance from a historical medical facility increases current individuals' body mass index by 0.4. We investigate some potential transmission channels and we find that the long-run effect of access to health care is not driven by persistence of infrastructure, but by improvements in individuals' health potential and changes in hygiene and health habits. Classification-JEL: I15, N35, O12, O15, Z12, Z13 Keywords: India, health, body mass index, historical persistence, Protestant missions. Series: Boston College Working Papers in Economics Number: 883 Creation-Date: 20150801 File-URL: http://fmwww.bc.edu/EC-P/wp883.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:883 Template-Type: ReDIF-Paper 1.0 Title: The Evolution of US Monetary Policy: 2000-2007 Author-Name: Michael T. Belongia Author-X-Name-First: Michael Author-X-Name-Last: Belongia Author-Workplace-Name: University of Mississippi Author-Name: Peter N. Ireland Author-X-Name-First: Peter Author-X-Name-Last: Ireland Author-Person: pir1 Author-Email: peter.ireland@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: This paper estimates a VAR with time-varying parameters to characterize the changes in Federal Reserve policy that occurred from 2000 through 2007 and assess how those changes affected the performance of the U.S. economy. The results point to a gradual shift in the Fed's emphasis over this period, away from stabilizing inflation and towards stabilizing output. A persistent deviation of the federal funds rate from the settings prescribed by the estimated monetary policy rule appears more important, however, in causing inflation to overshoot its target in the years leading up to the Great Recession. Classification-JEL: C32, E31, E32, E37, E52, E58 Keywords: Federal Reserve, Monetary Policy, Bayesian VAR, Time-Varying Parameters Series: Boston College Working Papers in Economics Number: 882 Creation-Date: 20150807 File-URL: http://fmwww.bc.edu/EC-P/wp882.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:882 Template-Type: ReDIF-Paper 1.0 Author-Name: Alexander Kurov Author-X-Name-First: Alexander Author-X-Name-Last: Kurov Author-Person: pku378 Author-Email: alkurov@mail.wvu.edu Author-Workplace-Name: Department of Finance, West Virginia University Author-Name: Alessio Sancetta Author-X-Name-First: Alessio Author-X-Name-Last: Sancetta Author-Workplace-Name: Royal Holloway, University of London Author-Name: Georg H. Strasser Author-X-Name-First: Georg Author-X-Name-Last: Strasser Author-Person: pst327 Author-Email: Georg.Strasser@ecb.europa.eu Author-Workplace-Name: European Central Bank Author-Name: Marketa Halova Wolfe Author-X-Name-First: Marketa Author-X-Name-Last: Wolfe Author-Person: pha810 Author-Email: mwolfe@skidmore.edu Author-Workplace-Name: Skidmore College Title: Price Drift before U.S. Macroeconomic News: Private Information about Public Announcements? Abstract: We examine stock index and Treasury futures markets around releases of U.S. macroeconomic announcements from 2003 to 2014. Since 2008 seven out of 18 market-moving announcements show evidence of substantial informed trading before the official release time. Prices begin to move in the "correct" direction about 30 minutes before the release time. The pre-announcement price move accounts on average for about half of the total price adjustment. This pre-announcement price drift has not been documented before. We examine four possible explanations. The evidence points to leakage and proprietary data collection as the most likely causes of the new drift. Creation-Date: 20150625 Revision-Date: 20150729 File-URL: http://fmwww.bc.edu/EC-P/wp881.pdf File-Format: application/pdf File-Function: main text Classification-JEL: E44; G14; G15 Series: Boston College Working Papers in Economics Number: 881 Keywords: Macroeconomic news announcements; financial markets; pre-announcement effect; drift; informed trading Handle: RePEc:boc:bocoec:881 Template-Type: ReDIF-Paper 1.0 Title: The Impact of Hours Flexibility on Career Employment, Bridge Jobs, and the Timing of Retirement Author-Name: Kevin E. Cahill Author-X-Name-First: Kevin Author-X-Name-Last: Cahill Author-Email: cahillkc@bc.edu Author-Workplace-Name: Sloan Center on Aging & Work at Boston College Author-Name: Michael D. Giandrea Author-X-Name-First: Michael Author-X-Name-Last: Giandrea Author-Email: giandrea.michael@bls.gov Author-Workplace-Name: U.S. Bureau of Labor Statistics Author-Name: Joseph F. Quinn Author-Email: quinnj@bc.edu Author-Person: pqu7 Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: To what extent does hours flexibility in career employment impact the retirement process? Workplace flexibility policies have the potential to improve both the welfare of employees and the business outcomes of employers. These policies, and hours flexibility in particular for older Americans, have also been touted as a way to reduce turnover. For older Americans, reductions in turnover could mean more years in career employment, fewer years in bridge employment, and little or no impact on the timing of retirement. Alternatively, hours flexibility in career employment could lead to longer working lives and delayed retirements. The distinction between the two outcomes is important if hours flexibility policies, such as phased retirement, are to be considered an option for alleviating the strains of an aging society. This paper describes how hours flexibility in career employment impacts the retirement patterns of older Americans. We use data on three cohorts of older Americans from the Health and Retirement Study (HRS), a large nationally-representative dataset that began in 1992. We explore the extent to which hours flexibility arrangements are available and utilized in career employment and explore the extent to which such arrangements impact job transitions later in life. We find that bridge job prevalence is higher among those with access to hours flexibility in career employment compared to those without hours flexibility. Further, while we find mixed evidence that hours flexibility extends time in career employment, we do find that hours flexibility in career employment is associated with longer tenure on bridge jobs. Taken together these results suggest that hours flexibility in career employment is associated with extended work lives, particularly in post-career employment. Series: Boston College Working Papers in Economics Number: 880 Creation-Date: 20140212 Keywords:  Economics of Aging, Partial Retirement, Gradual Retirement Classification-JEL:  J26, J14, J32, H55 File-URL: http://fmwww.bc.edu/EC-P/wp880.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:880 Template-Type: ReDIF-Paper 1.0 Title: Behavioral Consumers in Industrial Organization Author-Name: Michael D. Grubb Author-X-Name-First: Michael Author-X-Name-Last: Grubb Author-Person: pgr239 Author-Email: michael.grubb@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: This paper succinctly overviews three primary branches of the industrial organization literature with behavioral consumers. The literature is organized according to whether consumers: (1) have non-standard preferences, (2) are overconfident or otherwise biased such that they systematically misweight different dimensions of price and other product attributes, or (3) fail to choose the best price due to suboptimal search, confusion comparing prices, or excessive inertia. The importance of consumer heterogeneity and equilibrium effects are also highlighted along with recent empirical work. Keywords: behavioral industrial organization; bounded rationality; loss aversion; present bias; overconfidence; search; obfuscation; switching; inertia Classification-JEL: D41, D42, D43, D81, D82, D83, L11, L12, L13, L15 Series: Boston College Working Papers in Economics Number: 879 Creation-Date: 20150512 File-URL: http://fmwww.bc.edu/EC-P/wp879.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:879 Template-Type: ReDIF-Paper 1.0 Title: Failing to Choose the Best Price: Theory, Evidence, and Policy Author-Name: Michael D. Grubb Author-X-Name-First: Michael Author-X-Name-Last: Grubb Author-Person: pgr239 Author-Email: michael.grubb@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: Both the "law of one price" and Bertrand's (1883) prediction of marginal cost pricing for homogeneous goods rest on the assumption that consumers will choose the best price. In practice, consumers often fail to choose the best price because they search too little, become confused comparing prices, and then show excessive inertia through too little switching away from past choices or default options. This is particularly true when price is a vector rather than a scalar, and consumers have limited experience in the relevant market. All three mistakes may contribute to positive markups that fail to diminish as the number of competing sellers increases. Firms may have an incentive to exacerbate these problems by obfuscating prices, thereby using complexity to make price comparisons diffcult and soften competition. Possible regulatory interventions include simplifying the choice environment, for instance by restricting price to be a scalar, advising consumers of their expected costs under each option, or choosing on behalf of consumers. Keywords: behavioral industrial organization; bounded rationality; search; obfuscation; switching; inertia Classification-JEL: D43, D83, L11, L13, L15 Series: Boston College Working Papers in Economics Number: 878 Creation-Date: 20150518 File-URL: http://fmwww.bc.edu/EC-P/wp878.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:878 Template-Type: ReDIF-Paper 1.0 Title: Overconfident Consumers in the Marketplace Author-Name: Michael D. Grubb Author-X-Name-First: Michael Author-X-Name-Last: Grubb Author-Person: pgr239 Author-Email: michael.grubb@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Keywords: overconfidence; overoptimism; overprecision; bias; naiveté; three-part tariff; present bias; self-control; prospective memory; inattention; pass-through; nudge; contract; behavioral industrial organization Classification-JEL: D41, D42, D43, D81, D82, D83, L11, L12, L13, L15 Series: Boston College Working Papers in Economics Number: 877 Creation-Date: 20150315 File-URL: http://fmwww.bc.edu/EC-P/wp877.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:877 Template-Type: ReDIF-Paper 1.0 Author-Name: Christopher F Baum Author-X-Name-First: Christopher Author-X-Name-Last: Baum Author-Person: pba1 Author-Email: baum@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Workplace-Name: DIW Berlin Author-Name: Hans Lööf Author-X-Name-First: Hans Author-X-Name-Last: Lööf Author-Person: plf1 Author-Email: hans.loof@indek.kth.se Author-Workplace-Name: Royal Institute of Technology, Stockholm Author-Name: Pardis Nabavi Author-X-Name-First: Pardis Author-X-Name-Last: Nabavi Author-Person: pna405 Author-Email: pardis.nabavi@indek.kth.se Author-Workplace-Name: Royal Institute of Technology, Stockholm Author-Name: Andreas Stephan Author-X-Name-First: Andreas Author-X-Name-Last: Stephan Author-Person: pst185 Author-Email: andreas.stephan@jibs.hj.se Author-Workplace-Name: Jönkoping International Business School Title: A New Approach to Estimation of the R&D-Innovation-Productivity Relationship Abstract: We evaluate a Generalized Structural Equation Model (GSEM) approach to the estimation of the relationship between R&D, innovation and productivity that focuses on the potentially crucial heterogeneity across technology and knowledge levels. The model accounts for selectivity and handles the endogeneity of this relationship in a recursive framework. Employing a panel of Swedish firms observed in three consecutive Community Innovation Surveys, our maximum likelihood estimates show that many key channels of influence among the model's components differ meaningfully in their statistical significance and magnitude across sectors defined by different technology levels. Creation-Date: 20150529 Publication-Status: published, Economics of Innovation and New Technology, 2017, 26:1-2, 121-133 File-URL: http://fmwww.bc.edu/EC-P/wp876.pdf File-Format: application/pdf File-Function: main text Classification-JEL: C23, L6, O32, O52 Series: Boston College Working Papers in Economics Number: 876 Keywords: R&D, Innovation, Productivity, Generalized Structural Equation Model, Community Innovation Survey Handle: RePEc:boc:bocoec:876 Template-Type: ReDIF-Paper 1.0 Title: Does It Matter Where You Came From? Ancestry Composition and Economic Performance of U.S. Counties, 1850-2010 Author-Name: Scott Fulford Author-X-Name-First: Scott Author-X-Name-Last: Fulford Author-WorkPlace-Name: Consumer Financial Protection Bureau Author-Email: scott.fulford@cfpb.gov Author-Person: pfu103 Author-Name: Ivan Petkov Author-X-Name-First: Ivan Author-X-Name-Last: Petkov Author-WorkPlace-Name: Northeastern University Author-Person: ppe761 Author-Email: i.petkov@northeastern.edu Author-Name: Fabio Schiantarelli Author-X-Name-First: Fabio Author-X-Name-Last: Schiantarelli Author-Email: schianta@bc.edu Author-Person: psc8 Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Workplace-Name: IZA Abstract: What impact do immigrants and their descendants have in the short and long term? The answer depends on the attributes they bring with them, what they pass on to their children, and how they interact with other groups. We develop the first measures of the country-of-ancestry composition and GDP per worker for US counties from 1850 to 2010. We show that ancestry groups have different impacts on county productivity. Groups from countries with higher economic development, with cultural traits that favor cooperation, and with a long history of a centralized state have a greater positive impact on county GDP per worker. Ancestry diversity is positively related to county GDP per worker, while diversity in origin-country economic development or culture is negatively related. Series: Boston College Working Papers in Economics Number: 875 Creation-Date: 20150515 Revision-Date: 20200419 Keywords: Immigration, Ethnicity, Ancestry, Economic Development, Culture, Institutions Classification-JEL: J15, N31, N32, O10, Z10 File-URL: http://fmwww.bc.edu/EC-P/wp875.pdf File-Format: application/pdf File-Function: main text File-URL: http://fmwww.bc.edu/EC-P/wp875app.pdf File-Format: application/pdf File-Function: appendix Handle: RePEc:boc:bocoec:875 Template-Type: ReDIF-Paper 1.0 Author-Name: Thomas Gilbert Author-X-Name-First: Thomas Author-X-Name-Last: Gilbert Author-Email: gilbertt@u.washington.edu Author-WorkPlace-Name: University of Washington Author-Name: Chiara Scotti Author-X-Name-First: Chiara Author-X-Name-Last: Scotti Author-Email: chiara.scotti@frb.gov Author-WorkPlace-Name: Federal Reserve System, Board of Governors Author-Name: Georg H. Strasser Author-X-Name-First: Georg Author-X-Name-Last: Strasser Author-Person: pst327 Author-Email: Georg.Strasser@bc.edu Author-Workplace-Name: Department of Economics, Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Clara Vega Author-X-Name-First: Clara Author-X-Name-Last: Vega Author-Email: clara.vega@frb.gov Author-WorkPlace-Name: Federal Reserve System, Board of Governors Title: Is the Intrinsic Value of Macroeconomic News Announcements Related to Their Asset Price Impact? Abstract: The literature documents a heterogeneous asset price response to macroeconomic news announcements: Some announcements have a strong impact on asset prices and others do not. In order to explain these differences, we estimate a novel measure of the intrinsic value of a macroeconomic announcement, which we define as the announcement's ability to nowcast GDP growth, inflation, and the Federal Funds Target Rate. Using the same nowcasting framework, we then decompose this intrinsic value into the announcement's characteristics: its relation to fundamentals, timing, and revision noise. We find that in the 1998-2013 period, a significant fraction of the variation in the announcements' price impact on the Treasury bond futures market can be explained by differences in intrinsic value. Furthermore, our novel measure of timing explains significantly more of this variation than the announcements' relation to fundamentals, reporting lag (which previous studies have used as a measure of timing), or revision noise. Creation-Date: 20150226 Revision-Date: 20150423 File-URL: http://fmwww.bc.edu/EC-P/wp874.pdf File-Format: application/pdf File-Function: main text Classification-JEL: C53, D83, E27, E37, E44, E47, E5, G1 Keywords: Macroeconomic announcements, price discovery, public information, macroeconomic forecasting, learning, coordination role of public information, central bank policy Series: Boston College Working Papers in Economics Number: 874 Handle: RePEc:boc:bocoec:874 Template-Type: ReDIF-Paper 1.0 Title: On the Nature and Stability of Sentiments Author-Name: Ryan Chahrour Author-X-Name-First: Ryan Author-X-Name-Last: Chahrour Author-Person: pch1111 Author-Email: ryan.chahrour@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Gaetano Gaballo Author-X-Name-First: Gaetano Author-X-Name-Last: Gaballo Author-WorkPlace-Name: Banque de France, Monetary Policy Division Author-Email: gaetano.gaballo@banque-france.fr Abstract: We show that non-trivial aggregate fluctuations may originate with vanishingly- small common shocks to either information or fundamentals. These "sentiment" fluctuations can be driven by self-fulfilling variation in either first-order beliefs (as in Benhabib et al., 2015) or higher-order beliefs (as in Angeletos and La'O, 2013), due to an endogenous signal structure. We analyze out-of-equilibrium best-response functions in the underlying coordination game to study whether sentiment equilibria are stable outcomes of a convergent process. We nd that limiting sentiment equilibria are generally unattainable under both higher-order belief and adaptive learning dynamics, whereas equilibria without sentiment shocks show strong stability properties. Away from the limit case, however, multiple noisy rational expectations equilibria may be stable. Classification-JEL: D82, D83, E3 Keywords: imperfect information, animal spirits, expectational coordination Series: Boston College Working Papers in Economics Number: 873 Creation-Date: 20150212 Revision-Date: 20150505 File-URL: http://fmwww.bc.edu/EC-P/wp873.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:873 Template-Type: ReDIF-Paper 1.0 Title: Matching with Slot-Specific Priorities: Theory Author-Name: Scott Duke Kominers Author-Workplace-Name: Harvard University Author-Name: Tayfun Sönmez Author-X-Name-First: Tayfun Author-X-Name-Last: Sönmez Author-Email: sonmezt@bc.edu Author-Person: psi57 Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: We introduce a two-sided, many-to-one matching with contracts model in which agents with unit demand match to branches that may have multiple slots available to accept contracts. Each slot has its own linear priority order over contracts; a branch chooses contracts by filling its slots sequentially, according to an order of precedence. We demonstrate that in these matching markets with slot-specific priorities, branches' choice functions may not satisfy the substitutability conditions typically crucial for matching with contracts. Despite this complication, we are able to show that stable outcomes exist in this framework and can be found by a cumulative offer mechanism that is strategy-proof and respects unambiguous improvements in priority. Series: Boston College Working Papers in Economics Number: 872 Creation-Date: 20141217 Keywords: Market Design, Matching with Contracts, Stability, Strategy-Proofness, School Choice, Affirmative Action, Airline Seat Upgrades. Classification-JEL: C78, D47, D63, D78 File-URL: http://fmwww.bc.edu/EC-P/wp872.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:872 Template-Type: ReDIF-Paper 1.0 Title: Designing Practical and Fair Sequential Team Contests Author-Name: Nejat Anbarcı Author-X-Name-First: Nejat Author-X-Name-Last: Anbarcı Author-Email: nejat.anbarci@durham.ac.uk Author-WorkPlace-Name: Durham University Author-Person: pan102 Author-Name: Ching-Jen Sun Author-X-Name-First: Ching-Jen Author-X-Name-Last: Sun Author-Email: ching-jen.sun@deakin.edu.au Author-Person: psu193 Author-WorkPlace-Name: Deakin University Author-Name: M. Utku Ünver Author-X-Name-First: M. Author-X-Name-Last: Ünver Author-Person: pun2 Author-Workplace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: Economists have long recognized that the effect of the order of actions in sequential contests on performance of the contestants is far from negligible. We model the tiebreak mechanisms, known as penalty shootouts, which have sequential move order and are used in several team-sports contests, as a practical dynamic mechanism-design problem. We characterize all order-independent mechanisms; in such mechanisms two balanced teams have equal chances to win the shootout whenever the score is tied after equal numbers of attempts and hence move order has no relevance for winning chances. Using additional desirable properties, we uniquely characterize practical mechanisms. In most sports, such as football and hockey, the order in which teams take the penalties is fixed, known as ABAB, and a few high-level football competitions recently adopted the alternating-order variant mechanism, ABBA. Our results imply that these two and all other exogenous-order mechanisms – with one exception – are order dependent in regular rounds. Although ABBA is order independent in sudden-death rounds, ABAB fails there, too. Our theory supports empirical studies linking ABAB to unfair outcomes and multiple equilibria in terms of winning chances of the first- vs. second-kicking teams in different football traditions. Series: Boston College Working Papers in Economics Number: 871 Creation-Date: 20150115 Revision-Date: 20210415 Keywords: Tiebreak mechanisms, penalty shootouts, fairness in sequential contests, mechanism design, market design, order independence Classification-JEL: File-URL: http://fmwww.bc.edu/EC-P/wp871.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:871 Template-Type: ReDIF-Paper 1.0 Title: Decomposing Random Mechanisms Author-Name: Marek Pycia Author-X-Name-First: Marek Author-X-Name-Last: Pycia Author-Email: marek.pycia@econ.uzh.ch Author-WorkPlace-Name: University of Zurich Author-Person: ppy24 Author-Name: M. Utku Ünver Author-X-Name-First: M. Author-X-Name-Last: Ünver Author-Person: pun2 Author-Workplace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: Random mechanisms have been used in real-life situations for reasons such as fairness. Voting and matching are two examples of such situations. We investigate whether desirable properties of a random mechanism survive decomposition of the mechanism as a lottery over deterministic mechanisms that also hold such properties. To this end, we represent properties of mechanisms--such as ordinal strategy-proofness or individual rationality--using linear constraints. Using the theory of totally unimodular matrices from combinatorial integer programming, we show that total unimodularity is a sufficient condition for the decomposability of linear constraints on random mechanisms. As two illustrative examples, we show that individual rationality is totally unimodular in general, and that strategy-proofness is totally unimodular in some individual choice models. However, strategy-proofness, unanimity, and feasibility together are not totally unimodular in collective choice environments in general. We thus introduce a direct constructive approach for such problems. Using this approach, we prove that feasibility, strategy-proofness, and unanimity, with and without anonymity, are decomposable on non-dictatorial single-peaked voting domains. Series: Boston College Working Papers in Economics Number: 870 Creation-Date: 20140930 Keywords: Random mechanisms, ordinal mechanisms, total unimodularity, singlepeaked preferences, voting, individual rationality, strategy-proofness, unanimity, anonymity, generalized median voter rules, universal truthfulness Classification-JEL: C60, D71, D72 File-URL: http://fmwww.bc.edu/EC-P/wp870.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:870 Template-Type: ReDIF-Paper 1.0 Title: Identification of structural models in the presence of measurement error due to rounding in survey responses Author-Name: Stefan Hoderlein Author-X-Name-First: Stefan Author-X-Name-Last: Hoderlein Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Person: pho119 Author-Name: Bettina Siflinger Author-X-Name-First: Bettina Author-X-Name-Last: Siflinger Author-Workplace-Name: University of Mannheim Author-Email: bettina.siflinger@uni-mannheim.de Author-Name: Joachim Winter Author-X-Name-First: Joachim Author-X-Name-Last: Winter Author-Workplace-Name: University of Munich Author-Email: winter@lmu.de Abstract: Distortions in the elicitation of economic variables arise frequently. A common problem in household surveys is that reported values exhibit a significant degree of rounding. We interpret rounding as a filter that allows limited information about the relationship of interest to pass. We argue that rounding is an active decision of the survey respondent, and propose a general structural model that helps to explain some of the typical distortions that arise out of this active decision. Specifically, we assume that there is insufficient ability of individuals to acquire, process and recall information, and that rational individuals aim at using the scarce resources they devote to a survey in an optimal fashion. This model implies selection and places some structure on the selection equation. We use the formal model to correct for some of the distorting effects of rounding on the relationship of interest, using all the data available. Finally, we show how the concepts developed in this paper can be applied in consumer demand analysis by exploiting a controlled survey experiment, and obtain plausible results. Keywords: heaping; nonparametric; survey design; bounded rationality; identification Classification-JEL: C20, C26, D12 Series: Boston College Working Papers in Economics Number: 869 Creation-Date: 20150119 File-URL: http://fmwww.bc.edu/EC-P/wp869.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:869 Template-Type: ReDIF-Paper 1.0 Title: Enhancing the Efficiency of and Equity in Transplant Organ Allocation via Incentivized Exchange Author-Name: Tayfun Sönmez Author-X-Name-First: Tayfun Author-X-Name-Last: Sönmez Author-Email: sonmezt@bc.edu Author-Person: psi57 Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: M. Utku Ünver Author-X-Name-First: M. Author-X-Name-Last: Ünver Author-Person: pun2 Author-Workplace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: Within the last decade kidney exchange has become a mainstream paradigm to increase the number of kidney transplants. However, compatible pairs do not participate, and the full benefit from exchange can be realized only if they do. In this paper, we propose a new incentive scheme that relies on incentivizing participation of compatible pairs in exchange via insurance for the patient for a future renal failure. Efficiency and equity analyses of this scheme are conducted and compared with efficiency and equity outcomes of live donation and living donor organ exchange. We also present the potential role of such an incentive scheme to strengthen the national kidney exchange system. Series: Boston College Working Papers in Economics Number: 868 Creation-Date: 20150115 Keywords: Market design, organ allocation, kidney exchange, equity, efficiency, compatible pairs Classification-JEL: D47, C78 Note: A later version of this paper appears as WP 931. File-URL: http://fmwww.bc.edu/EC-P/wp868.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:868 Template-Type: ReDIF-Paper 1.0 Title: Searching for Wages in an Estimated Labor Matching Model Author-Name: Ryan Chahrour Author-X-Name-First: Ryan Author-X-Name-Last: Chahrour Author-Person: pch1111 Author-Email: ryan.chahrour@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Sanjay K. Chugh Author-X-Name-First: Sanjay Author-X-Name-Last: Chugh Author-Person: pch1272 Author-WorkPlace-Name: Ohio State University Author-Email: chugh.14@osu.edu Author-Name: Tristan Potter Author-X-Name-First: Tristan Author-X-Name-Last: Potter Author-WorkPlace-Name: Drexel University Author-Email: tristan.l.potter@drexel.edu Abstract: We estimate a real business cycle economy with search frictions in the labor market in which the latent wage follows a non-structural ARMA process. The estimated model does an excellent job matching a broad set of quantity data and wage indicators. Under the estimated process, wages respond immediately to shocks but converge slowly to their long-run levels, inducing substantial variation in labor's share of surplus. These results are not consistent with either a rigid real wage or flexible Nash bargaining. Despite inducing a strong endogenous response of wages, neutral shocks to productivity account for the vast majority of aggregate fluctuations in the economy, including labor market variables. Classification-JEL: E32, E24 Keywords: Search and Matching, Wages, Unemployment, Business Cycles Note: Previously circulated as "Wages and Wedges in an Estimated Labor Search Model" Series: Boston College Working Papers in Economics Number: 867 Creation-Date: 20141217 Revision-Date: 20161220 File-URL: http://fmwww.bc.edu/EC-P/wp867.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:867 Template-Type: ReDIF-Paper 1.0 Title: Good News is Bad News: Leverage Cycles and Sudden Stops Author-Name: Ozge Akinci Author-X-Name-First: Ozge Author-X-Name-Last: Akinci Author-WorkPlace-Name: Board of Governors of the Federal Reserve System Author-Name: Ryan Chahrour Author-X-Name-First: Ryan Author-X-Name-Last: Chahrour Author-Person: pch1111 Author-Email: ryan.chahrour@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: We show that a model with imperfectly forecastable changes in future productivity and an occasionally-binding collateral constraint can match a set of stylized facts about Sudden Stop events. "Good" news about future productivity raises leverage during times of expansions, increasing the probability that the constraint binds, and a Sudden Stop occurs, in future periods. During the Sudden Stop, the nonlinear effects of the constraint induce output, consumption and investment to fall substantially below trend, as they do in the data. Also consistent with data, the economy exhibits a boom period prior to the Sudden Stop, with output, consumption, and investment all above trend. Classification-JEL: E32,F41,F44,G15 Keywords: News Shocks, Sudden Stops, Leverage, Boom-Bust Cycle Series: Boston College Working Papers in Economics Number: 866 Creation-Date: 20141205 Revision-Date: 20150430 File-URL: http://fmwww.bc.edu/EC-P/wp866.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:866 Template-Type: ReDIF-Paper 1.0 Author-Name: Michael Pesko Author-X-Name-First: Michael Author-X-Name-Last: Pesko Author-Person: ppe676 Author-Email: mip2037@med.cornell.edu Author-Workplace-Name: Department of Healthcare Policy and Research, Weill Cornell Medical College, Cornell University Author-Name: Christopher F Baum Author-X-Name-First: Christopher Author-X-Name-Last: Baum Author-Person: pba1 Author-Email: baum@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Workplace-Name: DIW Berlin Title: The Self-Medication Hypothesis: Evidence from Terrorism and Cigarette Accessibility Abstract: We use single equation and simultaneous instrumental variable models to explore if individuals smoke during times of stress (i.e., motivation effect) and if they are successful in self-medicating short-term stress (i.e., self-medication effect). Short-term stress is a powerful motivator of smoking, and the decision to smoke could trigger biological feedback that immediately reduces short-term stress. This feedback confounds estimates of the relationship between stress and smoking. Omitted variables, such as genetic or social factors, could also suggest a spurious correlation. We use data on self- reported smoking and stress from 240,388 current and former smokers. We instrument stress with temporal distance from September 11, 2001 (using date of interview). We instrument smoking with cigarette accessibility variables of cigarette price changes and distance to state borders. In the absence of accounting for feedback and other forms of endogeneity, we find that smoking is associated with increases in short-term stress. This is opposite of our theoretical prediction for self-medication. However, when we account for endogeneity we find no evidence of smoking affecting short-term stress. We do find a consistent positive effect of stress on smoking. Creation-Date: 20141112 Revision-Date: 20160207 Publication-Status: published, Economics and Human Biology, 2016, 22:94-102. File-URL: http://fmwww.bc.edu/EC-P/wp865.pdf File-Format: application/pdf File-Function: main text Classification-JEL: C26, C36, I19 Series: Boston College Working Papers in Economics Number: 865 Keywords: smoking, self-medication, stress Handle: RePEc:boc:bocoec:865 Template-Type: ReDIF-Paper 1.0 Title: Empirical Properties of Diversion Ratios Author-Name: Christopher T. Conlon Author-X-Name-First: Christopher Author-X-Name-Last: Conlon Author-Person: pco543 Author-Email: cconlon@stern.nyu.edu Author-WorkPlace-Name: New York University, Stern School Author-Name: Julie Holland Mortimer Author-X-Name-First: Julie Author-X-Name-Last: Mortimer Author-Person: pmo678 Author-Email: julie.mortimer.2@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Series: Boston College Working Papers in Economics Number: 864 Abstract: The 2010 Department of Justice and Federal Trade Commission Horizontal Merger Guidelines lay out a new standard for assessing proposed mergers in markets with differentiated products. This new standard is based on a measure of "upward pricing pressure," (UPP) and the calculation of a "gross upward pricing pressure index" (GUPPI) in turn relies on a "diversion ratio," which measures the fraction of consumers of one product that switch to another product when the price of the first product increases. One way to calculate a diversion ratio is to estimate own- and cross-price elasticities. An alternative (and more direct) way to gain insight into diversion is to exogenously remove a product from the market and observe the set of products to which consumers actually switch. In the past, economists have rarely had the ability to experiment in this way, but more recently, the growth of digital and online markets, combined with enhanced IT, has improved our ability to conduct such experiments. In this paper, we analyze the snack food market, in which mergers and acquisitions have been especially active in recent years. We exogenously remove six top-selling products (either singly or in pairs) from vending machines and analyze subsequent changes in consumers' purchasing patterns, firm profits, diversion ratios, and upward pricing pressure. Using both nonparametric analyses and structural demand estimation, we find significant diversion to remaining products. Both diversion and the implied upward pricing pressure differ significantly across manufacturers, and we identify cases in which the GUPPI would imply increased regulatory scrutiny of a proposed merger. Creation-Date: 20131130 Revision-Date: 20190101 Classification-JEL: L00, L4, L40, D4, D43 Keywords: diversion ratios, merger guidelines, Bayesian estimators, treatment effects Note: Previously circulated as "An Experimental Approach to Merger Evaluation" File-URL: http://fmwww.bc.edu/EC-P/wp864.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:864 Template-Type: ReDIF-Paper 1.0 Title: Efficiency and Foreclosure Effects of Vertical Rebates: Empirical Evidence Author-Name: Christopher T. Conlon Author-X-Name-First: Christopher Author-X-Name-Last: Conlon Author-Person: pco543 Author-Email: cconlon@stern.nyu.edu Author-WorkPlace-Name: New York University, Stern School Author-Name: Julie Holland Mortimer Author-X-Name-First: Julie Author-X-Name-Last: Mortimer Author-Person: pmo678 Author-Email: julie.mortimer.2@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Series: Boston College Working Papers in Economics Number: 863 Abstract: Vertical rebates are prominently used across a wide range of industries. These contracts may induce greater retail effort, but may also prompt retailers to drop competing products. We study these offsetting efficiency and foreclosure effects empirically, using data from one retailer. Using a field experiment, we show how the rebate allocates the cost of effort between manufacturer and retailer. We estimate models of consumer choice and retailer behavior to quantify the rebate’s effect on assortment and retailer effort. We find that the rebate increases industry profitability and consumer utility, but fails to maximize social surplus and leads to upstream foreclosure. Creation-Date: 20140925 Revision-Date: 20170601 Classification-JEL: L00, L4, L42, L8, L81 Keywords: foreclosure, vertical restraints, conditional pricing practices, rebates Note: previously circulated as "Efficiency and Foreclosure Effects of All-Units Discounts: Empirical Evidence" File-URL: http://fmwww.bc.edu/EC-P/wp863.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:863 Template-Type: ReDIF-Paper 1.0 Title: The surprisingly low importance of income uncertainty for precaution Author-Name: Scott Fulford Author-X-Name-First: Scott Author-X-Name-Last: Fulford Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Person: pfu103 Abstract: While it is common to use income uncertainty to explain household saving decisions, there is much disagreement about the importance of precautionary saving. This paper suggests that income uncertainty is not an important motive for saving, although households do have other precautionary reasons to save. Using a question from the Survey of Consumer Finances that asks how much households want for precautionary purposes, this paper shows that expressed household preferences, and liquid savings, are much lower than predicted by standard modeling assumptions. Households rarely list unemployment as a reason to save. Perceived income uncertainty does not affect liquid savings or precautionary preferences. Neither does being in an occupation with higher income volatility. Instead, households seem very concerned with expenditure shocks. Keywords: Income uncertainty; precaution; buffer-stock model; household saving; consumption Classification-JEL: D14, D91, E21 Series: Boston College Working Papers in Economics Number: 862 Creation-Date: 20140801 File-URL: http://fmwww.bc.edu/EC-P/wp862.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:862 Template-Type: ReDIF-Paper 1.0 Title: Costly Information Processing and Income Expectations Author-Name: Daniel Gutknecht Author-X-Name-First: Daniel Author-X-Name-Last: Gutknecht Author-Workplace-Name: Oxford University Author-Email: Daniel.Gutknecht@economics.ox.ac.uk Author-Name: Stefan Hoderlein Author-X-Name-First: Stefan Author-X-Name-Last: Hoderlein Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Person: pho119 Author-Name: Michael Peters Author-X-Name-First: Michael Author-X-Name-Last: Peters Author-Workplace-Name: Yale University Author-Email: m.peters@yale.edu Abstract: Do individuals use all information at their disposal when forming expectations about future events? In this paper we present an econometric framework to answer this question. We show how individual information sets can be characterized by simple nonparametric exclusion restrictions and provide a quantile based test for costly information processing. In particular, our methodology does not require individuals' expectations to be rational, and we explicitly allow for individuals to have access to sources of information which the econometrician cannot observe. As an application, we use microdata on individual income expectations to study the information agents employ when forecasting future earnings. Consistent with models where information processing is costly, we find that individuals' information sets are coarse in that valuable information is discarded. To quantify the utility costs, we calibrate a standard consumption life-cycle model. Consumers would be willing to pay 0.04% of their permanent income to incorporate the econometrician’s information set in their forecasts. This represents a lower bound on the costs of information processing. Keywords: Rational Expectations, Bounded Rationality, Information Set, Costly Information, Consumption Classification-JEL: D84,C14, D91 Series: Boston College Working Papers in Economics Number: 861 Creation-Date: 20141001 File-URL: http://fmwww.bc.edu/EC-P/wp861.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:861 Template-Type: ReDIF-Paper 1.0 Author-Name: Christopher F Baum Author-X-Name-First: Christopher Author-X-Name-Last: Baum Author-Person: pba1 Author-Email: baum@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Workplace-Name: DIW Berlin Author-Name: Paola Zerilli Author-X-Name-First: Paola Author-X-Name-Last: Zerilli Author-Person: pze62 Author-Email: paola.zerilli@york.ac.edu Author-Workplace-Name: Department of Economics and Related Studies, University of York Title: Jumps and stochastic volatility in crude oil futures prices using conditional moments of integrated volatility Abstract: We evaluate alternative models of the volatility of commodity futures prices based on high-frequency intraday data from the crude oil futures markets for the October 2001-December 2012 period. These models are implemented with a simple GMM estimator that matches sample moments of the realized volatility to the corresponding population moments of the integrated volatility. Models incorporating both stochastic volatility and jumps in the returns series are compared on the basis of the overall fit of the data over the full sample period and subsamples. We also find that jumps in the returns series add to the accuracy of volatility forecasts. Creation-Date: 20141001 Publication-Status: published, Energy Economics, 53:175-181, 2016. File-URL: http://fmwww.bc.edu/EC-P/wp860.pdf File-Format: application/pdf File-Function: main text Classification-JEL: G13, Q41 Series: Boston College Working Papers in Economics Number: 860 Keywords: stochastic volatility, commodity futures prices, crude oil futures Handle: RePEc:boc:bocoec:860 Template-Type: ReDIF-Paper 1.0 Title: Deadbeat Dads Author-Name: Andrew Beauchamp Author-X-Name-First: Andrew Author-X-Name-Last: Beauchamp Author-Person: pbe748 Author-Email: beauchaa@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Geoffrey Sanzenbacher Author-X-Name-First: Geoffrey Author-X-Name-Last: Sanzenbacher Author-WorkPlace-Name: Boston College Author-Person: psa1308 Author-Name: Shannon Seitz Author-X-Name-First: Shannon Author-X-Name-Last: Seitz Author-WorkPlace-Name: Analysis Group Author-Person: pse14 Author-Name: Meghan Skira Author-X-Name-First: Meghan Author-X-Name-Last: Skira Author-WorkPlace-Name: University of Georgia Author-Person: psk78 Abstract: Why do some men father children outside of marriage but not provide support? Why are some single women willing to have children outside of marriage when they receive little or no support from unmarried fathers? Why is this behavior especially common among blacks? To shed light on these questions, we develop and estimate a dynamic equilibrium model of marriage, employment, fertility, and child support. We consider the extent to which low earnings and a shortage of single men relative to single women among blacks can explain the prevalence of deadbeat dads and non-marital childbearing. We estimate the model by indirect inference using data from the National Longitudinal Survey of Youth 1979. We simulate three distinct counterfactual policy environments: perfect child support enforcement, eliminating the black-white earnings gap, and equalizing black-white population supplies (and therefore gender ratios). We nd perfect enforcement reduces non-marital childbearing dramatically, particularly among blacks; over time it translates into many fewer couples living with children from past relationships, and therefore less deadbeat fatherhood. Eliminating the black-white earnings gap reduces the marriage rate di erence between blacks and whites by 29 to 43 percent; black child poverty rates fall by nearly 40 percent. Finally equalizing gender ratios has little effect on racial differences in marriage and fertility. Keywords: Marriage, divorce, fertility, single motherhood, non-marital childbearing, employment, dynamic discrete choice, indirect inference Classification-JEL: C51, C61, D12, D13, J12, J13, J22 Series: Boston College Working Papers in Economics Number: 859 Creation-Date: 20140722 File-URL: http://fmwww.bc.edu/EC-P/wp859.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:859 Template-Type: ReDIF-Paper 1.0 Title: The Pennsylvania Adoption Exchange Improves Its Matching Process Author-Name: Vincent W. Slaugh Author-X-Name-First: Vincent Author-X-Name-Last: Slaugh Author-Email: vslaugh@cmu.edu Author-WorkPlace-Name: Tepper School of Business, Carnegie Mellon University Author-Name: Mustafa Akan Author-X-Name-First: Mustafa Author-X-Name-Last: Akan Author-Email: akan@cmu.edu Author-WorkPlace-Name: Tepper School of Business, Carnegie Mellon University Author-Name: Onur Kesten Author-X-Name-First: Onur Author-X-Name-Last: Kesten Author-Email: okesten@cmu.edu Author-WorkPlace-Name: Tepper School of Business, Carnegie Mellon University Author-Name: M. Utku Ünver Author-X-Name-First: M. Author-X-Name-Last: Ünver Author-Person: pun2 Author-Workplace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: The Pennsylvania Adoption Exchange (PAE) helps case workers representing children in state custody by recommending prospective families for adoption. We describe PAE's operational challenges using case worker surveys and a regression analysis of data on child outcomes over multiple years. Using a discrete-event simulation of PAE, we justify the value of a statewide adoption network and demonstrate the importance of the family preference information quality on the percentage of children who successfully nd adoptive placements. Finally, we detail a series of simple improvements implemented by PAE to increase the adoptive placement rate through collecting more valuable information, improving the family ranking algorithm, and aligning incentives for families to provide useful preference information. Series: Boston College Working Papers in Economics Number: 858 Creation-Date: 20140801 Revision-Date: 20151114 Keywords: community OR; public service; decision support; market design Classification-JEL: D47, C78 File-URL: http://fmwww.bc.edu/EC-P/wp858.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:858 Template-Type: ReDIF-Paper 1.0 Title: Rational Bias in Inflation Expectations Author-Name: Robert G. Murphy Author-X-Name-First: Robert Author-X-Name-Last: Murphy Author-Email: murphyro@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Person: pmu16 Author-Name: Adam Rohde Author-Workplace-Name: Charles River Associates Abstract: This paper argues that individuals may rationally weight price increases for food and energy products differently from their expenditure shares when forming expectations about price inflation. We develop a simple dynamic model of the economy with gradual price adjustment in the core sector and flexible prices in the food and energy sectors. Serial correlation of supply shocks to food and energy allows individuals to gain an understanding about future shocks, possibly making it optimal for individuals to place more weight on the movement of prices in these sectors. We use survey data on expected inflation to show that the weights implied by the model differ from the expenditure shares of food and energy prices in the CPI for the United States. We find food price inflation is weighted more heavily and energy price inflation is weighted less heavily. But importantly, we cannot reject the hypothesis that these weights reflect rational behavior in forming expectations about inflation. Keywords: Inflation Expectations, Core Inflation, Food and Energy Prices, Anchored Expectations Classification-JEL: E30, E31, E58 Series: Boston College Working Papers in Economics Number: 857 Publication-Status: forthcoming, Eastern Economic Journal Creation-Date: 20140801 Revision-Date: 20151025 File-URL: http://fmwww.bc.edu/EC-P/wp857.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:857 Template-Type: ReDIF-Paper 1.0 Title: The Economics of Nationalism Author-Name: Xiaohuan Lan Author-X-Name-First: Xiaohuan Author-X-Name-Last: Lan Author-Workplace-Name: Cheung Kong GSB Author-Name: Ben Li Author-X-Name-First: Ben Author-X-Name-Last: Li Author-Person: pli448 Author-Email: ben.li@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: This paper provides an economic framework for examining how economic openness affects nationalism. Within a country, a region's level of nationalism varies according to its economic interests in its domestic market relative to its foreign market. A region's nationalism is strongest if the optimal size of its domestic market equals the size of its country. All else being equal, increasing a region's foreign trade reduces its economic interests in its domestic market and thus weakens its nationalism. This prediction holds both cross-sectionally and over time, as evidenced by our empirical study using the Chinese Political Compass data and the World Value Surveys. Our framework also applies to analysis of nationalism across countries and receives support from cross-country data. Classification-JEL: F52, P16 Keywords: Nationalism, Economic Openness, Country Size, Gains from Trade, China Series: Boston College Working Papers in Economics Number: 856 Creation-Date: 20140504 File-URL: http://fmwww.bc.edu/EC-P/wp856.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:856 Template-Type: ReDIF-Paper 1.0 Title: Fixed Export Costs and Export Behavior Author-Name: Luis Castro Author-X-Name-First: Luis Author-X-Name-Last: Castro Author-Workplace-Name: Universidad Privada Boliviana, LaPaz, Boliviana Author-Name: Ben Li Author-X-Name-First: Ben Author-X-Name-Last: Li Author-Person: pli448 Author-Email: ben.li@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Keith Maskus Author-X-Name-First: Keith Author-X-Name-Last: Maskus Author-WorkPlace-Name: University of Colorado at Boulder Author-Name: Yiqing Xie Author-X-Name-First: Yiqing Author-X-Name-Last: Xie Author-WorkPlace-Name: Fudan University, Shanghai, China Abstract: This paper provides a direct test of how fixed export costs and productivity jointly determine firm-level export behavior. Using Chilean data, we construct indices of fixed export costs for each industry-region-year triplet and match them to domestic firms. Our empirical results show that firms facing higher fixed export costs are less likely to export, while those with higher productivity export more. These outcomes are the foundation of the widely-used sorting mechanism in trade models with firm heterogeneity. A particularly novel finding is that high-productivity nonexporters face greater fixed export costs than low-productivity exporters. We also find that the substitution between fixed export costs and productivity in determining export decisions is weaker for firms with higher productivity. Finally, both larger fixed export costs and greater within-triplet productivity dispersion raise the export volume of the average exporter. Classification-JEL: F10, F12, F14 Keywords: Sorting, firm heterogeneity, fixed export costs Series: Boston College Working Papers in Economics Number: 855 Creation-Date: 20140719 File-URL: http://fmwww.bc.edu/EC-P/wp855.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:855 Template-Type: ReDIF-Paper 1.0 Title: Optimal Capital Taxation and Consumer Uncertainty Author-Name: Ryan Chahrour Author-X-Name-First: Ryan Author-X-Name-Last: Chahrour Author-Person: pch1111 Author-Email: ryan.chahrour@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Justin Svec Author-X-Name-First: Justin Author-X-Name-Last: Svec Author-WorkPlace-Name: College of the Holy Cross Abstract: This paper analyzes the impact of consumer uncertainty on optimal fiscal policy in a model with capital. The consumers lack confidence about the probability model that characterizes the stochastic environment and so apply a max-min operator to their optimization problem. An altruistic fiscal authority does not face this Knightian uncertainty. We show analytically that, in responding to consumer uncertainty, the government no longer sets the expected capital tax rate exactly equal to zero, as is the case in the full-confidence benchmark model. Rather, our numerical results indicate that the government chooses to subsidize capital income, albeit at a modest rate. We also show that the government responds to consumer uncertainty by smoothing the labor tax across states and by making the labor tax persistent. Classification-JEL: E62, H21 Keywords: Model uncertainty, capital income tax, public debt Publication-Status: forthcoming, Journal of Macroeconomics Series: Boston College Working Papers in Economics Number: 854 Creation-Date: 20140401 File-URL: http://fmwww.bc.edu/EC-P/wp854.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:854 Template-Type: ReDIF-Paper 1.0 Title: Culture: Persistence and Evolution Author-Name: Francesco Giavazzi Author-X-Name-First: Francesco Author-X-Name-Last: Giavazzi Author-WorkPlace-Name: Bocconi University Author-Name: Ivan Petkov Author-X-Name-First: Ivan Author-X-Name-Last: Petkov Author-WorkPlace-Name: Boston College Author-Name: Fabio Schiantarelli Author-X-Name-First: Fabio Author-X-Name-Last: Schiantarelli Author-Email: schianta@bc.edu Author-Person: psc8 Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Workplace-Name: IZA Abstract: This paper presents evidence on the speed of evolution (or lack thereof) of a wide range of values and beliefs of different generations of European immigrants to the US. The main result is that persistence differs greatly across cultural attitudes. Some, for instance deep personal religious values, some fam-ily and moral values, and political orientation are very persistent. Other, such as attitudes toward cooperation, redistribution, effort, children independence, premarital sex, and even the frequency of religious practice or the intensity of association with one’s religion, converge rather quickly. Moreover, the results obtained studying higher generation immigrants differ greatly from those obtained limiting the analysis to the second generation, and imply lesser degree of persistence. Finally, we show that persistence is ”culture specific” in the sense that the country from which one’s ancestors came matters for the pattern of generational convergence. Series: Boston College Working Papers in Economics Number: 853 Creation-Date: 20140318 Revision-Date: 20190228 Keywords: Culture, Values, Beliefs, Transmission, Persistence, Evolution, Immigrants, Integration Classification-JEL: A13, F22, J00, J61, Z10 Publication-Status: forthcoming, Journal of Economic Growth File-URL: http://fmwww.bc.edu/EC-P/wp853.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:853 Template-Type: ReDIF-Paper 1.0 Title: Monetary Policy, Bond Risk Premia, and the Economy Author-Name: Peter N. Ireland Author-X-Name-First: Peter Author-X-Name-Last: Ireland Author-Person: pir1 Author-Email: peter.ireland@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: This paper develops an affine model of the term structure of interest rates in which bond yields are driven by observable and unobservable macroeconomic factors. It imposes restrictions to identify the effects of monetary policy and other structural disturbances on output, inflation, and interest rates and to decompose movements in long-term rates into terms attributable to changing expected future short rates versus risk premia. The estimated model highlights a broad range of channels through which monetary policy affects risk premia and the economy, risk premia affect monetary policy and the economy, and the economy affects monetary policy and risk premia. Classification-JEL: E32, E43, E44, E52, G12 Keywords: term structure, risk premia, monetary policy, macroeconomic performance Series: Boston College Working Papers in Economics Number: 852 Creation-Date: 20140201 File-URL: http://fmwww.bc.edu/EC-P/wp852.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:852 Template-Type: ReDIF-Paper 1.0 Title: Consumer Referrals Author-Name: Maria Arbatskaya Author-X-Name-First: Maria Author-X-Name-Last: Arbatskaya Author-Person: par31 Author-Workplace-Name: Emory University Author-Name: Hideo Konishi Author-X-Name-First: Hideo Author-X-Name-Last: Konishi Author-Person: pko35 Author-Email: konishih@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Series: Boston College Working Papers in Economics Number: 851 Abstract: In many industries, firms reward their customers for making referrals. We analyze the optimal policy mix of price, advertising intensity, and referral fee for monopoly when buyers choose to what extent to refer other consumers to the firm. We find that the firm uses its referral fee, but not its price or advertising level, to manage referrals. When consumers hold correct expectations about the true quality of the product, the firm charges the standard monopoly price. The firm always advertises less when it uses referrals. We extend the analysis to the case where consumer referrals can be targeted. Classification-JEL: C7, D4, D8, L1 Keywords: consumer referral policy, word of mouth, referral reward program, targeted advertising, product awareness Creation-Date: 20131021 Revision-Date: 20161101 Publication-Status: published, International Journal of Industrial Organization 48, 34-58, 2016 File-URL: http://fmwww.bc.edu/EC-P/wp851.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:851 Template-Type: ReDIF-Paper 1.0 Title: Managing Consumer Referrals in a Chain Network Author-Name: Maria Arbatskaya Author-X-Name-First: Maria Author-X-Name-Last: Arbatskaya Author-Person: par31 Author-Workplace-Name: Emory University Author-Name: Hideo Konishi Author-X-Name-First: Hideo Author-X-Name-Last: Konishi Author-Person: pko35 Author-Email: konishih@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Series: Boston College Working Papers in Economics Number: 850 Abstract: We consider the optimal pricing and referral strategy of a monopoly that uses a simple consumer communication network (a chain) to spread product information. The first-best policy with fully discriminatory position-based referral fees involves standard monopoly pricing and referral fees that provide consumers with strictly positive referral incentives. Effective price discrimination among consumers based on their positions in the chain occurs in both the first-best solution and the second-best solution (with a common referral fee). Classification-JEL: D4, D8, L1 Keywords: communication network, consumer referral policy, referral fee, price discrimination Creation-Date: 20140110 Revision-Date: 20161101 Publication-Status: published, Review of Network Economics, 13, 69-94, 2014 File-URL: http://fmwww.bc.edu/EC-P/wp850.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:850 Template-Type: ReDIF-Paper 1.0 Title: International Trade and Income Inequality Author-Name: Taiji Furusawa Author-X-Name-First: Taiji Author-X-Name-Last: Furusawa Author-Person: pfu122 Author-Workplace-Name: University of Tokyo Author-Name: Hideo Konishi Author-X-Name-First: Hideo Author-X-Name-Last: Konishi Author-Person: pko35 Author-Email: konishih@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Tran Lam Anh Duong Author-X-Name-First: Tran Author-X-Name-Last: Duong Author-Workplace-Name: University of Tsukuba Series: Boston College Working Papers in Economics Number: 849 Abstract: We propose a simple theory that shows a mechanism through which international trade entails wage and job polarization. We consider two countries in which individuals with different abilities work either as knowledge workers, who develop differentiated products, or as production workers, who engage in production. In equilibrium, ex ante symmetric firms attract knowledge workers with different abilities, which create firm heterogeneity in product quality. Market integration disproportionately benefits firms that produce high-quality products. This winner-take-all trend of product markets causes war for talents, which exacerbates income inequality within the countries and leads to labor-market polarization. Classification-JEL: F12, F16, J31 Keywords: Job polarization, middle-income class, globalization, trade liberalization Creation-Date: 20131030 Revision-Date: 20180922 Publication-Status: forthcoming, Scandinavian Journal of Economics File-URL: http://fmwww.bc.edu/EC-P/wp849.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:849 Template-Type: ReDIF-Paper 1.0 Title: Endogenous Party Structure Author-Name: Katsuya Kobayashi Author-X-Name-First: Katsuya Author-X-Name-Last: Kobayashi Author-Workplace-Name: Hosei University Author-Name: Hideo Konishi Author-X-Name-First: Hideo Author-X-Name-Last: Konishi Author-Person: pko35 Author-Email: konishih@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Series: Boston College Working Papers in Economics Number: 848 Abstract: This paper proposes a model of two-party representative democracy on a single-dimensional political space, in which voters choose their parties in order to influence the parties' choices of representative. After two candidates are selected as the median of each party's support group, Nature determines the candidates' relative lkeability (valence). Based on the candidates' political positions and relative likeability, voters vote for the preferable candidate without being tied to their party's choice. We show that (1) there exists a nontrivial equilibrium under natural conditions, and that (2) the equilibrium party border and the ex ante probabilities of the two-party candidates winning are sensitive to the distribution of voters. In particular, we show that if a party has a more concentrated subgroup, then the party tends to alienate its centrally located voters, and the party's probability of winning the final election is reduced. Even if voter distribution is symmetric, an extremist party (from either side) can emerge as voters become more politically divided. Classification-JEL: D72, P16 Keywords: two-party system, party primaries, voter sorting, probabilistic voting Creation-Date: 20131218 Revision-Date: 20161101 Publication-Status: published, Economics of Governance, 17, 317-351, 2016 File-URL: http://fmwww.bc.edu/EC-P/wp848.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:848 Template-Type: ReDIF-Paper 1.0 Title: Market Share Regulation? Author-Name: Hideo Konishi Author-X-Name-First: Hideo Author-X-Name-Last: Konishi Author-Person: pko35 Author-Email: konishih@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Çaglar Yurtseven Author-X-Name-First: Çaglar Author-X-Name-Last: Yurtseven Author-Workplace-Name: Bahcesehir University Series: Boston College Working Papers in Economics Number: 847 Abstract: In the 1950s and 60s, Japanese and US antitrust authorities occassionally used the degree of concentration to regulate industries. Does regulating firms based on their market shares make theoretical sense? We set up a simple duopoly model with stochastic R&D activities to evaluate market share regulation policy. On the one hand, market share regulation discourages the larger company's R&D investment and causes economic inefficiency. On the other hand, it facilitates the smaller company's survival, and prevents the larger company from monopolizing the market. We show that consumers tend to benefit from market share regulation. However, the social welfare including firms' profits would be hurt if both firms are equally good at R&D innovation. Nonetheless, if the smaller firm can make innovations more efficiently, then protecting smaller firms through market share regulation can improve the social welfare. We relate our analysis to a case study of Asahi Brewery's introducing Asahi Super Dry to become the top market share company in the industry. Classification-JEL: L13, L51, L66 Keywords: R&D investment, market share, regulations, welfare analysis Publication-Status: published, Japan and the World Economy, 29, 36-45 (2014) Creation-Date: 20131029 File-URL: http://fmwww.bc.edu/EC-P/wp847.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:847 Template-Type: ReDIF-Paper 1.0 Title: Efficiency and Labor Market Dynamics in a Model of Labor Selection Author-Name: Sanjay K. Chugh Author-X-Name-First: Sanjay Author-X-Name-Last: Chugh Author-Person: pch1272 Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Christian Merkl Author-Workplace-Name: Friedrich-Alexander-University Erlangen-Nuremberg Abstract: We characterize efficient allocations and cyclical fluctuations in a labor selection model. Potential new hires are heterogenous in the cross-section in their degree of training costs. In a calibrated version of the model that identifies costly selection with micro-level data on training costs, efficient fluctuations feature highly volatile unemployment and hiring rates, in line with empirical evidence. We show analytically in a partial equilibrium version of the model that volatility arises from selection effects, rather than general equilibrium effects. Classification-JEL: E24, E32, J20 Keywords: labor market frictions, hiring costs, efficiency, amplification Publication-Status: forthcoming, International Economic Review Series: Boston College Working Papers in Economics Number: 846 Creation-Date: 20130409 File-URL: http://fmwww.bc.edu/EC-P/wp846.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:846 Template-Type: ReDIF-Paper 1.0 Title: Optimal Fiscal Policy with Endogenous Product Variety Author-Name: Sanjay K. Chugh Author-X-Name-First: Sanjay Author-X-Name-Last: Chugh Author-Person: pch1272 Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Fabio Ghironi Author-X-Name-First: Fabio Author-X-Name-Last: Ghironi Author-Workplace-Name: University of Washington Abstract: We study Ramsey-optimal fiscal policy in an economy in which product varieties are the result of forward-looking investment decisions by firms. There are two main results. First, depending on the particular form of variety aggregation in preferences, firms' dividend payments may be either subsidized or taxed in the long run. This policy balances monopoly incentives for product creation with consumers' welfare benefit of product variety. In the most empirically relevant form of variety aggregation, socially efficient outcomes entail a substantial tax on dividend income, removing the incentive for over-accumulation of capital, which takes the form of variety. Second, optimal policy induces dramatically smaller, but efficient, fluctuations of both capital and labor markets than in a calibrated exogenous policy. Decentralization requires zero intertemporal distortions and constant static distortions over the cycle. The results relate to Ramsey theory, which we show by developing welfare-relevant concepts of efficiency that take into account product creation. Classification-JEL: E20, E21, E22, E32, E62 Keywords: zero intertemporal distortions, endogenous product variety, optimal taxation Series: Boston College Working Papers in Economics Number: 845 Creation-Date: 20120723 File-URL: http://fmwww.bc.edu/EC-P/wp845.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:845 Template-Type: ReDIF-Paper 1.0 Title: Firm Risk and Leverage Based Business Cycles Author-Name: Sanjay K. Chugh Author-X-Name-First: Sanjay Author-X-Name-Last: Chugh Author-Person: pch1272 Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: I characterize cyclical fluctuations in the cross-sectional dispersion of firm-level productivity in the U.S. manufacturing sector. Using the estimated dispersion, or "risk," stochastic process as an input to a baseline DSGE financial accelerator model, I assess how well the model reproduces aggregate cyclical movements in the financial conditions of U.S. non-financial firms. In the model, risk shocks calibrated to micro data induce large and empirically-relevant fluctuations in leverage, a nancial measure typically thought to be closely associated with real activity. In terms of aggregate quantities, however, pure risk shocks account for only a small share of GDP fluctuations in the model, less than one percent. Instead, it is standard aggregate productivity shocks that explain virtually all of the model's real fluctuations. These results reveal a dichotomy at the core of a popular class of DSGE financial frictions models: risk shocks induce large financial fiuctuations, but have little effect on aggregate quantity fluctuations. Classification-JEL: E10, E20, E32, E44 Keywords: leverage, second-moment shocks, time-varying volatility, credit frictions, financial accelerator, business cycles Series: Boston College Working Papers in Economics Number: 844 Creation-Date: 20130302 File-URL: http://fmwww.bc.edu/EC-P/wp844.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:844 Template-Type: ReDIF-Paper 1.0 Title: Skewed Noise Author-Name: David Dillenberger Author-X-Name-First: David Author-X-Name-Last: Dillenberger Author-Workplace-Name: University of Pennsylvania Author-Email: ddill@sas.upenn.edu Author-Name: Uzi Segal Author-X-Name-First: Uzi Author-X-Name-Last: Segal Author-Person: pse40 Author-Email: uzi.segal@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Series: Boston College Working Papers in Economics Number: 843 Abstract: We study the attitude of decision makers to skewed noise. For a binary lottery that yields the better outcome with probability p, we identify noise around p with a compound lottery that induces a distribution over the exact value of the probability and has an average value p. We propose and characterize a new notion of skewed distributions, and use a recursive non-expected utility model to provide conditions under which rejection of symmetric noise implies rejection of skewed to the left noise as well. We demonstrate that rejection of these types of noises does not preclude acceptance of some skewed to the right noise, in agreement with recent experimental evidence. We apply the model to study random allocation problems (one-sided matching) and show that it can predict systematic preferences for one allocation mechanism over the other, even if the two agree on the overall probability distribution over assignments. The model can also be used to address the phenomenon of ambiguity seeking in the context of decision making under uncertainty. Creation-Date: 20131125 Revision-Date: 20160726 Classification-JEL: D81, C78 Keywords: Skewed distributions, recursive non-expected utility, ambiguity seeking, one-sided matching Publication-Status: published, Journal of Economic Theory, 169 (2017), 344-364. File-URL: http://fmwww.bc.edu/EC-P/wp843.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:843 Template-Type: ReDIF-Paper 1.0 Title: Optimal Fiscal and Monetary Policy in Customer Markets Author-Name: David M. Arseneau Author-X-Name-First: David Author-X-Name-Last: Arseneau Author-Email: david.m.arseneau@frb.gov Author-WorkPlace-Name: Federal Reserve Board Author-Name: Ryan Chahrour Author-X-Name-First: Ryan Author-X-Name-Last: Chahrour Author-Person: pch1111 Author-Email: ryan.chahrour@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Sanjay K. Chugh Author-X-Name-First: Sanjay Author-X-Name-Last: Chugh Author-Person: pch1272 Author-WorkPlace-Name: Boston College Author-Name: Alan Finkelstein Shapiro Author-X-Name-First: Alan Author-X-Name-Last: Shapiro Author-Workplace-Name: Universidad de los Andes Author-Email: alanfshapiro@gmail.com Abstract: This paper presents a model in which some goods trade in "customer markets." In these markets, advertising plays a critical role in facilitating long-lived relationships. We estimate both policy and non-policy parameters of the model (which includes New-Keynesian frictions) on U.S. data, including advertising expenditures. The estimated parameters imply a large congestion externality in the pricing of customer market goods. This pricing inefficiency motivates the analysis of optimal policy. When the planner has access to a complete set of taxes and chooses them optimally, fiscal policy eliminates the externalities with large adjustments in the tax rates that operate directly in customer markets; labor tax volatility remains low. If available policy instruments are constrained to the interest rate and labor tax, then the latter displays large and procyclical fluctuations, while the implications for monetary policy are largely unchanged from the model with no customer markets. Classification-JEL: E30, E50, E61, E63 Publication-Status: published, Journal of Money, Credit and Banking, 2015, 47, 617-672 Keywords: fiscal policy, monetary policy, advertising, customer markets Series: Boston College Working Papers in Economics Number: 842 Creation-Date: 20131118 File-URL: http://fmwww.bc.edu/EC-P/wp842.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:842 Template-Type: ReDIF-Paper 1.0 Title: Credit Rating Agency Downgrades and the Eurozone Sovereign Debt Crises Author-Name: Christopher F. Baum Author-X-Name-First: Christopher Author-X-Name-Last: Baum Author-Person: pba1 Author-Email: baum@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Workplace-Name: DIW Berlin Author-Name: Dorothea Schäfer Author-X-Name-First: Dorothea Author-X-Name-Last: Schäfer Author-Person: psc175 Author-Workplace-Name: DIW Berlin Author-WorkPlace-Name: Jönköping International Business School Author-Email: dschaefer@diw.de Author-Name: Andreas Stephan Author-X-Name-First: Andreas Author-X-Name-Last: Stephan Author-WorkPlace-Name: Jönköping International Business School Author-Workplace-Name: DIW Berlin Author-Email: Andreas.Stephan@jibs.hj.se Author-Person: pst185 Abstract: This paper studies the impact of credit rating agency (CRA) downgrade announcements on the value of the Euro and the yields of French, Italian, German and Spanish long-term sovereign bonds during the culmination of the Eurozone debt crisis in 2011-2012. The employed GARCH models show that CRA downgrade announcements negatively affected the value of the Euro currency and also increased its volatility. Downgrading increased the yields of French, Italian and Spanish bonds but lowered the German bond's yields, although Germany's rating status was never touched by CRA. There is no evidence for Granger causality from bond yields to rating announcements. We infer from these findings that CRA announcements significantly influenced crisis-time capital allocation in the Eurozone. Their downgradings caused investors to rebalance their portfolios across member countries, out of ailing states' debt into more stable borrowers' securities. Keywords: Credit Rating Agencies, Euro Crisis, Sovereign Debt, Euro Exchange Rate Classification-JEL: G24, G01, G12, G14, E42, E43, E44, F31, F42, F65 Series: Boston College Working Papers in Economics Number: 841 Creation-Date: 20131101 Revision-Date: 20140130 Publication-Status: published, Journal of Financial Stability, 2016, 24, 117-131 File-URL: http://fmwww.bc.edu/EC-P/wp841.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:841 Template-Type: ReDIF-Paper 1.0 Title: Outcome Conditioned Treatment Effects Author-Name: Stefan Hoderlein Author-X-Name-First: Stefan Author-X-Name-Last: Hoderlein Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Person: pho119 Author-Name: Yuya Sasaki Author-X-Name-First: Yuya Author-X-Name-Last: Sasaki Author-Workplace-Name: Johns Hopkins University Author-Email: sasaki@jhu.edu Abstract: This paper introduces average treatment effects conditional on the outcome variable in an endogenous setup where outcome Y, treatment X and instrument Z are continuous. These objects allow to refine well studied treatment effects like ATE and ATT in the case of continuous treatment (see Florens et al (2008)), by breaking them up according to the rank of the outcome distribution. For instance, in the returns to schooling case, the outcome conditioned average treatment effect on the treated (ATTO), gives the average effect of a small increase in schooling on the subpopulation characterized by a certain treatment intensity, say 16 years of schooling, and a certain rank in the wage distribution. We show that IV type approaches are better suited to identify overall averages across the population like the average partial effect, or outcome conditioned versions thereof, while selection type methods are better suited to identify ATT or ATTO. Importantly, none of the identification relies on rectangular support of the errors in the identification equation. Finally, we apply all concepts to analyze the nonlinear heterogeneous effects of smoking during pregnancy on infant birth weight. Keywords: Continuous Treatment, Average Treatment Effect on the Treated, Marginal Treatment Effect, Average Partial Effect, Local Instrumental Variables, Nonseparable Model, Endogeneity, Quantiles Classification-JEL: C13, C14, C21, C26 Series: Boston College Working Papers in Economics Number: 840 Creation-Date: 20130817 File-URL: http://fmwww.bc.edu/EC-P/wp840.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:840 Template-Type: ReDIF-Paper 1.0 Title: Nonlinear Difference-in-Differences in Repeated Cross Sections with Continuous Treatments Author-Name: Xavier D'Haultfoeuille Author-X-Name-First: Xavier Author-X-Name-Last: D'Haultfoeuille Author-Workplace-Name: CREST Author-Email: xavier.dhaultfoeuille@ensae.fr Author-Name: Stefan Hoderlein Author-X-Name-First: Stefan Author-X-Name-Last: Hoderlein Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Person: pho119 Author-Name: Yuya Sasaki Author-X-Name-First: Yuya Author-X-Name-Last: Sasaki Author-Workplace-Name: Johns Hopkins University Author-Email: sasaki@jhu.edu Abstract: This paper studies the identification of nonseparable models with continuous, endogenous regressors, also called treatments, using repeated cross sections. We show that several treatment effect parameters are identified under two assumptions on the effect of time, namely a weak stationarity condition on the distribution of unobservables, and time variation in the distribution of endogenous regressors. Other treatment effect parameters are set identified under curvature conditions, but without any functional form restrictions. This result is related to the difference-in-differences idea, but does neither impose additive time effects nor exogenously defined control groups. Furthermore, we investigate two extrapolation strategies that allow us to point identify the entire model: using monotonicity of the error term, or imposing a linear correlated random coefficient structure. Finally, we illustrate our results by studying the effect of mother's age on infants' birth weight. Keywords: identification, repeated cross sections, nonlinear models, continuous treatment, random coefficients, endogeneity, difference-in-differences. Classification-JEL: C13, C14, C23 Series: Boston College Working Papers in Economics Number: 839 Creation-Date: 20130813 File-URL: http://fmwww.bc.edu/EC-P/wp839.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:839 Template-Type: ReDIF-Paper 1.0 Title: A Triangular Treatment Effect Model With Random Coefficients In The Selection Equation Author-Name: Eric Gautier Author-X-Name-First: Eric Author-X-Name-Last: Gautier Author-Name: Stefan Hoderlein Author-X-Name-First: Stefan Author-X-Name-Last: Hoderlein Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Person: pho119 Abstract: This paper considers treatment effects under endogeneity with complex heterogeneity in the selection equation. We model the outcome of an endogenous treatment as a triangular system, where both the outcome and first-stage equations consist of a random coefficients model. The first-stage specifically allows for nonmonotone selection into treatment. We provide conditions under which marginal distributions of potential outcomes, average and quantile treatment effects, all conditional on first-stage random coefficients, are identified. Under the same conditions, we derive bounds on the (conditional) joint distributions of potential outcomes and gains from treatment, and provide additional conditions for their point identification. All conditional quantities yield unconditional effects (e.g., the average treatment effect) by weighted integration. Keywords: Treatment Effects, Endogeneity, Random Coefficients, Nonparametric Identification, Partial Identification, Roy Model, Ill-Posed Inverse Problems, Deconvolution, Radon Transform, Rates of Convergence Classification-JEL: C13, C14, C21, C26 Series: Boston College Working Papers in Economics Number: 838 Creation-Date: 20121115 Revision-Date: 20150915 File-URL: http://fmwww.bc.edu/EC-P/wp838.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:838 Template-Type: ReDIF-Paper 1.0 Title: Identification And Estimation In A Correlated Random Coefficients Binary Response Model Author-Name: Stefan Hoderlein Author-X-Name-First: Stefan Author-X-Name-Last: Hoderlein Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Person: pho119 Author-Name: Robert Sherman Author-X-Name-First: Robert Author-X-Name-Last: Sherman Abstract: We study identification and estimation in a binary response model with random coefficients B allowed to be correlated with regressors X. Our objective is to identify the mean of the distribution of B and estimate a trimmed mean of this distribution. Like Imbens and Newey (2009), we use instruments Z and a control vector V to make X independent of B given V. A consequent conditional median restriction helps identify the mean of B given V. Averaging over V identifies the mean of B. This leads to an analogous localize-then-average approach to estimation. We estimate conditional means with localized smooth maximum score estimators and average to obtain a root-n-consistent and asymptotically normal estimator of a trimmed mean of the distribution of B. Under the conditional median restrictions, the procedure can be adapted to produce a root-n-consistent and asymptotically normal estimator of the nonrandom regression coefficients in the models of Manski (1975,1985) and Horowitz (1992). We explore small sample performance through simulations, and present an application. Keywords: Heterogeneity, Correlated Random Coefficients, Endogeneity, Binary Response Model, Instrumental Variables, Control Variables, Conditional Median Restrictions. Classification-JEL: C13, C14, C25, D12 Series: Boston College Working Papers in Economics Number: 837 Creation-Date: 20120715 File-URL: http://fmwww.bc.edu/EC-P/wp837.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:837 Template-Type: ReDIF-Paper 1.0 Title: Testing Multivariate Economic Restrictions Using Quantiles: The Example of Slutsky Negative Semidefiniteness Author-Name: Holger Dette Author-X-Name-First: Holger Author-X-Name-Last: Dette Author-Workplace-Name: University of Bochum Author-Email: holger.dette@rub.de Author-Name: Stefan Hoderlein Author-X-Name-First: Stefan Author-X-Name-Last: Hoderlein Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Person: pho119 Author-Name: Natalie Neumeyer Author-X-Name-First: Natalie Author-X-Name-Last: Neumeyer Author-Workplace-Name: University of Hamburg Author-Email: neumeyer@math.uni-hamburg.de Abstract: This paper is concerned with testing rationality restrictions using quantile regression methods. Specifically, we consider negative semidefiniteness of the Slutsky matrix, arguably the core restriction implied by utility maximization. We consider a heterogeneous population characterized by a system of nonseparable structural equations with infinite dimensional unobservable. To analyze this economic restriction, we employ quantile regression methods because they allow us to utilize the entire distribution of the data. Difficulties arise because the restriction involves several equations, while the quantile is a univariate concept. We establish that we may test the economic restriction by considering quantiles of linear combinations of the dependent variable. For this hypothesis we develop a new empirical process based test that applies kernel quantile estimators, and derive its large sample behavior. We investigate the performance of the test in a simulation study. Finally, we apply all concepts to Canadian microdata, and show that rationality is not rejected. Keywords: Nonparametric Testing, Heterogeneity, Integrability, Nonseparable Models, Consumer Demand, Quantile Regression Classification-JEL: C12, C14, D12 Series: Boston College Working Papers in Economics Number: 836 Creation-Date: 20130927 File-URL: http://fmwww.bc.edu/EC-P/wp836.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:836 Template-Type: ReDIF-Paper 1.0 Title: Random Coefficients in Static Games of Complete Information Author-Name: Fabian Dunker Author-X-Name-First: Fabian Author-X-Name-Last: Dunker Author-Workplace-Name: University of Goettingen Author-Email: dunker@math.uni-goettingen.de Author-Name: Stefan Hoderlein Author-X-Name-First: Stefan Author-X-Name-Last: Hoderlein Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Person: pho119 Author-Name: Hiroaki Kaido Author-X-Name-First: Hiroaki Author-X-Name-Last: Kaido Author-Workplace-Name: Brown University Author-Email: hkaido@bu.edu Abstract: Individual players in a simultaneous equation binary choice model act differently in different environments in ways that are frequently not captured by observables and a simple additive random error. This paper proposes a random coefficient specification to capture this type of heterogeneity in behavior, and discusses nonparametric identification and estimation of the distribution of random coefficients. We establish nonparametric point identification of the joint distribution of all random coefficients, except those on the interaction effects, provided the players behave competitively in all markets. Moreover, we establish set identification of the density of the coefficients on the interaction effects, and provide additional conditions that allow to point identify this density. Since our identification strategy is constructive throughout, it allows to construct sample counterpart estimators. We analyze their asymptotic behavior, and illustrate their finite sample behavior in a numerical study. Finally, we discuss several extensions, like the semiparametric case, or correlated random coefficients. Keywords: Games, Heterogeneity, Nonparametric Identification, Random Coefficients, Inverse Problems Classification-JEL: C13, C14, C25, D01, D22, D43 Series: Boston College Working Papers in Economics Number: 835 Creation-Date: 20130325 File-URL: http://fmwww.bc.edu/EC-P/wp835.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:835 Template-Type: ReDIF-Paper 1.0 Author-Name: Christopher F Baum Author-X-Name-First: Christopher Author-X-Name-Last: Baum Author-Person: pba1 Author-Email: baum@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Workplace-Name: DIW Berlin Author-Name: Alexander Kurov Author-X-Name-First: Alexander Author-X-Name-Last: Kurov Author-Person: pku378 Author-Email: alkurov@mail.wvu.edu Author-Workplace-Name: Department of Finance, West Virginia University Author-Name: Marketa W. Halova Author-X-Name-First: Marketa Author-X-Name-Last: Halova Author-Person: pha810 Author-Email: marketa.halova@wsu.edu Author-Workplace-Name: Department of Economics, Washington State University Title: What do Chinese Macro Announcements Tell Us About the World Economy? Abstract: We examine the effect of scheduled macroeconomic announcements made by China on world financial and commodity futures markets. All announcements related to Chinese manufacturing and industrial output move stock markets, energy and industrial commodities as well as commodity currencies. News about Chinese domestic consumption leaves most markets unaffected, suggesting that market participants view the announcements primarily as a signal of the state of the global economy rather than merely of China's domestic demand. The market response to unexpectedly strong output announcements is not consistent with investors being concerned about tightening of Chinese macroeconomic policy; instead, the world markets view strong Chinese output as a rising tide that lifts all boats. Creation-Date: 20131001 Revision-Date: 20150601 File-URL: http://fmwww.bc.edu/EC-P/wp834.pdf File-Format: application/pdf File-Function: main text Classification-JEL: G14, G15, F44 Publication-Status: forthcoming, Journal of International Money and Finance Series: Boston College Working Papers in Economics Number: 834 Keywords: announcements, China, futures markets, stock markets Handle: RePEc:boc:bocoec:834 Template-Type: ReDIF-Paper 1.0 Title: The changing geography of gender in India Author-Name: Scott Fulford Author-X-Name-First: Scott Author-X-Name-Last: Fulford Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Person: pfu103 Abstract: This paper examines the changing distribution of where women and girls live in India at the smallest scale possible: India's nearly 600,000 villages. The village level variation in the proportion female is far larger than the variation across districts. Decomposing the variance, I show that village India is becoming more homogeneous in its preferences for boys even as that preference becomes more pronounced. A consequence is that 70% of girls grow up in villages where they are the distinct minority. Most Indian women move on marriage, yet marriage migration has almost no gender equalizing influence. Further, by linking all villages across censuses, I show that most changes in village infrastructure are not related to changes in child gender. Gaining primary schools and increases in female literacy decrease the proportion of girls. The results suggests that there are no easy policy solutions for addressing the increasing masculinization of Indian society. Keywords: Marriage migration; Sex ratios; Son preference; Geographic distribution of women; Asia; India Classification-JEL: O15, J12, J16 Series: Boston College Working Papers in Economics Number: 833 Creation-Date: 20130930 File-URL: http://fmwww.bc.edu/EC-P/wp833.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:833 Template-Type: ReDIF-Paper 1.0 Title: Intersectoral Linkages, Diverse Information, and Aggregate Dynamics Author-Name: Manoj Atolia Author-X-Name-First: Manoj Author-X-Name-Last: Atolia Author-Email: matolia@fsu.edu Author-WorkPlace-Name: Florida State University Author-Name: Ryan Chahrour Author-X-Name-First: Ryan Author-X-Name-Last: Chahrour Author-Person: pch1111 Author-Email: ryan.chahrour@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: What do firms learn from their interactions in markets, and what are the implications for aggregate dynamics? We address this question in a multi-sector real-business cycle model with a sparse input-output structure. In each sector, firms observe their own productivity, along with the prices of their inputs and the price of their output. We show that general equilibrium market-clearing conditions place heavy constraints on average expectations, and characterize a set of cases where average expectations (and average dynamics) are exactly those of the full-information model. This "aggregate irrelevance" of information can occur even when sectoral expectations and dynamics are quite different under partial information, and despite the fact that each sector represents a non-negligible portion of the overall economy. In numerical examples, we show that even when the conditions for aggregate irrelevance of information are not met, aggregate dynamics remain nearly identical to the full-information model under reasonable calibrations. Classification-JEL: D52, D57, D80, E32 Keywords: Imperfect information, Information frictions, Dispersed information, Sectoral linkages, Strategic complementarity, Higher-order expectations Series: Boston College Working Papers in Economics Number: 832 Creation-Date: 20130916 Revision-Date: 20150512 File-URL: http://fmwww.bc.edu/EC-P/wp832.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:832 Template-Type: ReDIF-Paper 1.0 Author-Name: Eyal Dvir Author-X-Name-First: Eyal Author-X-Name-Last: Dvir Author-Person: pdv5 Author-Email: dvire@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Georg H. Strasser Author-X-Name-First: Georg Author-X-Name-Last: Strasser Author-Person: pst327 Author-Email: Georg.Strasser@bc.edu Author-Workplace-Name: Department of Economics, Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Title: Does Marketing Widen Borders? Cross-Country Price Dispersion in the European Car Market Abstract: Pricing-to-market (PTM), the practice of differentiating the price of a good across markets, is commonly attributed to differential distribution and border costs. In this paper we show that some of this price differentiation is sustained by manufacturers selling different versions of an otherwise identical good in different markets. We study price differences across countries in the European car market, using a rich data set which includes detailed technical information on each car model. Relative car prices show no sign of convergence during the period 2003-2011. PTM is pervasive in this market: model-specific real exchange rates for mechanically identical cars differ significantly from unity. They also vary significantly across countries and, within countries, across car manufacturers. We find strong evidence that car manufacturers price discriminate by manipulating the menu of included car options and features available in each country, e.g. by including air conditioning as a standard feature as opposed to pricing it separately. We find that such bundling decisions sustain cross-country price differences of 10% and more. Creation-Date: 20130823 Revision-Date: 20140404 File-URL: http://fmwww.bc.edu/EC-P/wp831.pdf File-Format: application/pdf File-Function: main text Classification-JEL: D43, F15, F31 Series: Boston College Working Papers in Economics Number: 831 Keywords: law of one price, market segmentation, price dispersion, price discrimination, European car market Handle: RePEc:boc:bocoec:831 Template-Type: ReDIF-Paper 1.0 Title: Instability: Monetary and Real Author-Name: Michael T. Belongia Author-X-Name-First: Michael Author-X-Name-Last: Belongia Author-Workplace-Name: University of Mississippi Author-Name: Peter N. Ireland Author-X-Name-First: Peter Author-X-Name-Last: Ireland Author-Person: pir1 Author-Email: peter.ireland@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: Fifty years ago, Friedman and Schwartz presented evidence of pro-cyclical movements in the money stock, exhibiting a lead over corresponding movements in output, found in historical monetary statistics for the United States. Very similar relationships appear in more recent data. To see them clearly, however, one must use Divisia monetary aggregates in place of the Federal Reserve’s official, simple-sum measures. One must also split the data sample to focus, separately, on episodes before and after 1984 and on a new episode of instability beginning in 2000. A structural VAR draws tight links between Divisia money and output during each of these three periods. Classification-JEL: E31, E32, E51, E52 Keywords: money, output, Divisia aggregates, structural VAR Series: Boston College Working Papers in Economics Number: 830 Creation-Date: 20130801 File-URL: http://fmwww.bc.edu/EC-P/wp830.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:830 Template-Type: ReDIF-Paper 1.0 Title: Cellular Service Demand: Biased Beliefs, Learning, and Bill Shock Author-Name: Michael D. Grubb Author-X-Name-First: Michael Author-X-Name-Last: Grubb Author-Person: pgr239 Author-Email: michael.grubb@bc.edu Author-Name: Matthew Osborne Author-X-Name-First: Matthew Author-X-Name-Last: Osborne Author-Email: Matthew.Osborne@bea.gov Author-WorkPlace-Name: Bureau of Economic Analysis, U.S. Department of Commerce Abstract: By April 2013, the FCC's recent bill-shock agreement with cellular carriers requires consumers be notified when exceeding usage allowances. Will the agreement help or hurt consumers? To answer this question, we estimate a model of consumer plan choice, usage, and learning using a panel of cellular bills. Our model predicts that the agreement will lower average consumer welfare by $2 per year because firms will respond by raising monthly fees. Our approach is based on novel evidence that consumers are inattentive to past usage (meaning that bill-shock alerts are informative) and advances structural modeling of demand in situations where multipart tariffs induce marginal-price uncertainty. Additionally, our model estimates show that an average consumer underestimates both the mean and variance of future calling. These biases cost consumers $42 per year at existing prices. Moreover, absent bias, the bill-shock agreement would have little to no effect. Keywords: bill shock, biased beliefs, learning, inattention, cellular, telecommunications, overconfidence Classification-JEL: L1, L96, D8 Series: Boston College Working Papers in Economics Number: 829 Creation-Date: 20120227 Publication-Status: published, American Economic Review, 2015, 105:1, 234-271 File-URL: http://fmwww.bc.edu/EC-P/wp829.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:829 Template-Type: ReDIF-Paper 1.0 Title: Consumer Inattention and Bill-Shock Regulation Author-Name: Michael D. Grubb Author-X-Name-First: Michael Author-X-Name-Last: Grubb Author-Person: pgr239 Author-Email: michael.grubb@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: For many goods and services, such as cellular-phone service and debit-card transactions, the price of the next unit of service depends on past usage. As a result, consumers who are inattentive to their past usage but are aware of contract terms may remain uncertain about the price of the next unit. I develop a model of inattentive consumption, derive equilibrium pricing when consumers are inattentive, and evaluate bill-shock regulation requiring firms to disclose information that substitutes for attention. When inattentive consumers are heterogeneous and unbiased, bill-shock regulation reduces social welfare in fairly-competitive markets, which may be the effect of the FCC's recent bill-shock agreement. If inattentive consumers underestimate their demand, however, then bill-shock regulation can lower market prices and protect consumers from exploitation. Hence the Federal Reserve's new opt-in rule for debit-card overdraft protection may substantially benefit consumers. Keywords: inattention, bill shock, consumer protection, bias, cellular, overdraft Classification-JEL: D8, L1, D4 Series: Boston College Working Papers in Economics Number: 828 Creation-Date: 20120703 Publication-Status: published, Review of Economic Studies, 2015, 82:1, 219-257 File-URL: http://fmwww.bc.edu/EC-P/wp828.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:828 Template-Type: ReDIF-Paper 1.0 Title: The Fertility-Sex Ratio Tradeoff: Unintended Consequences of Financial Incentives Author-Name: S. Anukriti Author-X-Name-First: S. Author-X-Name-Last: Anukriti Author-Email: anukriti@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: Lower fertility can translate into a more male-biased sex ratio if son preference is persistent and technology for sex-selection is easily accessible. This paper investigates whether financial incentives can overcome this trade-off in the context of an Indian scheme, Devirupak, that seeks to decrease both fertility and the sex ratio at birth. First, I construct a model where the effects of incentives are determined by the strength of son preference, the cost of children, and the cost of sex-selection, relative to the size of incentives. Second, I create a woman-year panel dataset from retrospective birth histories and use variation in the composition of pre-existing children as well as the state and the year of program implementation to estimate its causal effect. Devirupak successfully lowers the number of children by 0.9 percent, but mainly through a 1.9 percent decrease in the number of daughters. Faced with a choice between a son and only daughters, couples choose a son despite lower monetary benefits, and thus the sex ratio at birth unintentionally increases. A subsidy worth 10 months of average household consumption expenditure is insufficient to induce parents to give up sons entirely. Instead, Devirupak increases the proportion of one-boy couples by 5 percent. Only the most financially disadvantaged groups exhibit an increase in the proportion of one-girl couples. Keywords: Demographics, fertility, sex ratio, financial incentives, childbearing Classification-JEL: D1, J13, J16, I15 Series: Boston College Working Papers in Economics Number: 827 Creation-Date: 20130715 File-URL: http://fmwww.bc.edu/EC-P/wp827.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:827 Template-Type: ReDIF-Paper 1.0 Author-Name: Marketa Halova Wolfe Author-X-Name-First: Marketa Author-X-Name-Last: Wolfe Author-Email: marketa.halova@wsu.edu Author-Workplace-Name: Department of Economics, Washington State University Author-Name: Georg H. Strasser Author-X-Name-First: Georg Author-X-Name-Last: Strasser Author-Person: pst327 Author-Email: Georg.Strasser@bc.edu Author-Workplace-Name: Department of Economics, Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Title: Learning to Argue with Intermediate Macro Theory: A Semester-Long Team Writing Project Abstract: We describe experiences from integrating a semester-long economic analysis project into an intermediate macroeconomic theory course. Students work in teams of "economic advisors" to write a series of nested reports for a decision-maker, analyzing the current economic situation, evaluating and proposing policies while responding to events during the semester in real-time. The project simulates real-world policy con- sulting with an emphasis on applying economic theory and models. We describe the project setup and how to tailor its theme to current events, explain methods for keep- ing it manageable in larger classes, and document student learning outcomes by survey results and report summaries. Besides improving the learning experience, this project equips economics students to contribute their own views to policy debates and buttress them with tight macroeconomic reasoning. Creation-Date: 20130811 Revision-Date: 20140423 File-URL: http://fmwww.bc.edu/EC-P/wp826.pdf File-Format: application/pdf File-Function: main text Classification-JEL: A20, A22, E00, G01 Publication-Status: published, Journal of Economic Education, 2014, 45:3, 191-210 Series: Boston College Working Papers in Economics Number: 826 Keywords: Teaching intermediate macroeconomic theory, financial crisis, cooperative learning, team-based writing project Handle: RePEc:boc:bocoec:826 Template-Type: ReDIF-Paper 1.0 Title: Identifying the Average Treatment Effect in a Two Threshold Model Author-Name: Arthur Lewbel Author-X-Name-First: Arthur Author-X-Name-Last: Lewbel Author-Person: ple43 Author-Email: lewbel@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Thomas Tao Yang Author-Workplace-Name: Boston College Abstract: Assume individuals are treated if a latent variable, containing a continuous instrument, lies between two thresholds. We place no functional form restrictions on the latent errors. Here unconfoundedness does not hold and identification at infinity is not possible. Yet we still show nonparametric point identification of the average treatment effect. We provide an associated root-n consistent estimator. We apply our model to reinvestigate the inverted-U relationship between competition and innovation, estimating the impact of moderate competitiveness on innovation without the distributional assumptions required by previous analyses. We find no evidence of an inverted-U in US data. Keywords: Average treatment effect, Ordered choice model, Special regressor, Semiparametric, Competition and innovation, Identification. Classification-JEL: C14, C21, C26 Series: Boston College Working Papers in Economics Number: 825 Creation-Date: 20130701 File-URL: http://fmwww.bc.edu/EC-P/wp825.pdf File-Format: application/pdf File-Function: main text File-URL: http://fmwww.bc.edu/EC-P/wp825appendix.pdf File-Format: application/pdf File-Function: supplemental appendix Handle: RePEc:boc:bocoec:825 Template-Type: ReDIF-Paper 1.0 Title: Financial Markets, Banks' Cost of Funding, and Firms' Decisions: Lessons from Two Crises Author-Name: Pierluigi Balduzzi Author-X-Name-First: Pierluigi Author-X-Name-Last: Balduzzi Author-WorkPlace-Name: Boston College Author-Name: Emanuele Brancati Author-X-Name-First: Emanuele Author-X-Name-Last: Brancati Author-WorkPlace-Name: University of Rome, Tor Vergata Author-Name: Fabio Schiantarelli Author-X-Name-First: Fabio Author-X-Name-Last: Schiantarelli Author-Email: schianta@bc.edu Author-Person: psc8 Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Workplace-Name: IZA Abstract: We test whether adverse changes to banks' market valuations during the financial and sovereign debt crises, and the associated increase in banks' cost of funding, affected firms' real decisions. Using new data linking over 3,000 non-financial Italian firms to their bank(s), we find that increases in banks' CDS spreads, and decreases in their equity valuations, resulted in lower investment, employment, and bank debt for younger and smaller firms. These effects dominate those of banks' balance-sheet variables. Moreover, CDS spreads matter more than equity valuations. Finally, higher CDS spreads led to lower aggregate investment and employment, and to a less efficient resource allocation. Series: Boston College Working Papers in Economics Note: previously circulated as "Banks' Market Valuations and Firms' Decisions: Lessons from Two Crises" Number: 824 Creation-Date: 20130701 Revision-Date: 20160812 Keywords: Financial crisis, sovereign debt crisis, credit default swaps, investment, employment Classification-JEL: D92, G21, J23 File-URL: http://fmwww.bc.edu/EC-P/wp824.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:824 Template-Type: ReDIF-Paper 1.0 Title: Explaining Inflation in the Aftermath of the Great Recession Author-Name: Robert G. Murphy Author-X-Name-First: Robert Author-X-Name-Last: Murphy Author-Email: murphyro@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Person: pmu16 Abstract: This paper considers whether the Phillips curve can explain the recent behavior of inflation in the United States. Standard formulations of the model predict that the ongoing large shortfall in economic activity relative to full employment should have led to deflation over the past several years. I confirm previous findings that the slope of the Phillips curve has varied over time and probably is lower today than it was several decades ago. This implies that estimates using historical data will overstate the responsiveness of inflation to present-day economic conditions. I modify the traditional Phillips curve to explicitly account for time variation in its slope and show how this modified model can explain the recent behavior of inflation without relying on anchored expectations. Specifically, I explore reasons why the slope might vary over time, focusing on implications of the sticky-price and sticky-information approaches to price adjustment. These implications suggest that the inflation environment and uncertainty about regional economic conditions should influence the slope of the Phillips curve. I introduce proxies to account for these effects and find that a Phillips curve modified to allow its slope to vary with uncertainty about regional economic conditions can best explain the recent path of inflation. Keywords: Inflation, Phillips curve, Great Recession, Sticky Information, Sticky Prices Classification-JEL: E30, E31 Publication-Status: published, Journal of Macroeconomics, 2014, 40, 228-244 Series: Boston College Working Papers in Economics Number: 823 Creation-Date: 20130702 Revision-Date: 20141018 File-URL: http://fmwww.bc.edu/EC-P/wp823.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:823 Template-Type: ReDIF-Paper 1.0 Title: Capital Structure Adjustments: Do Macroeconomic and Business Risks Matter? Author-Name: Christopher F Baum Author-X-Name-First: Christopher Author-X-Name-Last: Baum Author-Person: pba1 Author-Email: baum@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Workplace-Name: DIW Berlin Author-Name: Mustafa Caglayan Author-X-Name-First: Mustafa Author-X-Name-Last: Caglayan Author-Person: pca30 Author-Workplace-Name: Heriot-Watt University Author-Name: Abdul Rashid Author-X-Name-First: Abdul Author-X-Name-Last: Rashid Author-Email: abdulrashid@iiu.edu.pk Author-Workplace-Name: International Islamic University, Islamabad, Pakistan Abstract: We empirically examine the influence of risk on firms' capital structure adjustments. The process of adjustment is asymmetric and depends on the type of risk, its magnitude, the firm's actual leverage with respect to its target, and its financial status. We show that firms with financial surpluses and above-target leverage adjust their leverage more rapidly when firm-specific risk is low and when macroeconomic risk is high. Firms with financial deficits and below-target leverage adjust their capital structure more quickly when both types of risk are low. Our findings help to explain why managers seek to time equity and debt markets. Keywords: macroeconomic risk; business risk; capital structure rebalancing; speed of adjustment; deviations from target leverage; financial deficits/surpluses Classification-JEL: C23, D81, E44, G32 Series: Boston College Working Papers in Economics Publication-Status: published, Empirical Economics, 53:4, 1463-1502, 2017. Number: 822 Creation-Date: 20130413 Revision-Date: 20160829 File-URL: http://fmwww.bc.edu/EC-P/wp822.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:822 Template-Type: ReDIF-Paper 1.0 Title: Household Formation and Markets Author-Name: Hans Gersbach Author-X-Name-First: Hans Author-X-Name-Last: Gersbach Author-Workplace-Name: ETH Zurich Author-Name: Hans Haller Author-Workplace-Name: Virginia Tech University Author-X-Name-First: Hans Author-X-Name-Last: Haller Author-Name: Hideo Konishi Author-X-Name-First: Hideo Author-X-Name-Last: Konishi Author-Person: pko35 Author-Email: konishih@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Series: Boston College Working Papers in Economics Number: 821 Abstract: We consider competitive markets for multiple commodities with endogenous formation of one- or two-person households. Within each two-person household, externalities from the partner's commodity consumption and unpriced actions are allowed. Each individual has two types of traits: observable characteristics and unobservable taste characteristics. Each individual gets utility from his/her own private consumption, from discrete actions such as job-choice, from the partner's observable characteristics such as appearance and hobbies, from some of the partner's consumption vectors, and from the partner's action choices. We investigate competitive market outcomes with an endogenous household structure in which no individual and no man/woman-pair can deviate profitably. We find a set of sufficient conditions under which a stable matching equilibrium exists. We further establish the first welfare theorem for this economy. Classification-JEL: D51, D61, D71 Keywords: endogenous household formation of households, consumption externalities, stable matching equilibrium, efficiency Publication-Status: published, Economic Theory, 59, 461-507, 2015. Creation-Date: 20130331 Revision-Date: 20161101 File-URL: http://fmwww.bc.edu/EC-P/wp821.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:821 Template-Type: ReDIF-Paper 1.0 Title: The Puzzle of Marriage Migration in India Author-Name: Scott Fulford Author-X-Name-First: Scott Author-X-Name-Last: Fulford Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Person: pfu103 Abstract: Two thirds of all Indian women have migrated for marriage, around 300 million women, but little is known about this vast migration. This paper provides a detailed accounting of the puzzlingly large migration of Indian women and evaluates its causes. Contrary to conventional wisdom, marriage migration does not contribute to risk sharing. Nor is it driven by sex ratio imbalances. Instead, I introduce a simple model in which parents must search for a spouse for their daughter geographically. By adding geographical search frictions, the model helps rationalize the large regional differences. Keywords: Migration, India, marriage Classification-JEL: O15, J12, J16 Series: Boston College Working Papers in Economics Number: 820 Creation-Date: 20120131 Revision-Date: 20131022 File-URL: http://fmwww.bc.edu/EC-P/wp820.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:820 Template-Type: ReDIF-Paper 1.0 Title: Returns to education in India Author-Name: Scott Fulford Author-X-Name-First: Scott Author-X-Name-Last: Fulford Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Person: pfu103 Abstract: Despite the evidence for high returns to education at an individual level, large increases in education across the developing world have brought disappointing returns in aggregate. This paper shows that the same pattern holds in India by building aggregates from micro-data so that the comparability and quality issues that plague cross-country analyses are not a problem. In India both men and women with more education live in households with greater consumption per capita. Yet in aggregate, comparing across age cohorts and states, better educated male cohorts consume only about 4% more than less well educated ones. Better educated female cohorts do not live in households with higher consumption. This result is robust to: (1) using econometric models that account for survey measurement error, (2) different measures of household consumption and composition, (3) allowing returns to differ by state, and (4) age mismeasurement. Comparing state returns to a measure of school quality, it does not seem that poor quality is responsible for the low returns. Keywords: education, India, household consumption, school quality Classification-JEL: O15, I2 Series: Boston College Working Papers in Economics Number: 819 Creation-Date: 20121231 Publication-Status: published, World Development, 2014, 59, 434-450 File-URL: http://fmwww.bc.edu/EC-P/wp819.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:819 Template-Type: ReDIF-Paper 1.0 Title: Dying to Retire: Adverse Selection and Welfare in Social Security Author-Name: Andrew Beauchamp Author-X-Name-First: Andrew Author-X-Name-Last: Beauchamp Author-Person: pbe748 Author-Email: beauchaa@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Mathis Wagner Author-X-Name-First: Mathis Author-X-Name-Last: Wagner Author-Person: pwa578 Author-Email: mathis.wagner@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: Despite facing some of the same challenges as private insurance markets, little is known about the role of adverse selection in social insurance programs. This paper studies adverse selection in Social Security retirement choices using data from the Health and Retirement Study. We find robust evidence that people who live longer choose larger annuities by delaying the age they first claim benefits, a form of adverse selection. To quantify welfare consequences we develop and estimate a simple model of annuity choice. We exploit variation in longevity, the underlying source of private information, to identify the key structural parameters: the coefficient of relative risk aversion and the discount rate. We estimate that adverse selection reduces social welfare by 2.3-3.5 percent, and increases the costs to the Social Security Trust Fund by 2.1-2.5 percent, relative to the first best allocation. Counterfactual simulations suggest program adjustments could generate both economically significant decreases in costs and small increases in social welfare. We estimate an optimal non-linear accrual rate which would result in welfare gains of 1.4 percent, and cost reductions of 6.1 percent of current program costs. Keywords: Adverse Selection, Social Security, Optimal Policy Classification-JEL: J26, D82 Series: Boston College Working Papers in Economics Number: 818 Creation-Date: 20121231 Revision-Date: 20130815 File-URL: http://fmwww.bc.edu/EC-P/wp818.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:818 Template-Type: ReDIF-Paper 1.0 Title: Specification Testing for Transformation Models with an Application to Generalized Accelerated Failure-time Models Author-Name: Arthur Lewbel Author-X-Name-First: Arthur Author-X-Name-Last: Lewbel Author-Person: ple43 Author-Email: lewbel@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Xun Lu Author-X-Name-First: Xun Author-X-Name-Last: Lu Author-WorkPlace-Name: Hong Kong University of Science and Technology Author-Name: Liangjun Su Author-X-Name-First: Liangjun Author-X-Name-Last: Su Author-WorkPlace-Name: Singapore Management University Abstract: Consider a nonseparable model Y=R(X,U) where Y and X are observed, while U is unobserved and conditionally independent of X. This paper provides the first nonparametric test of whether R takes the form of a transformation model, meaning that Y is monotonic in the sum of a function of X plus a function of U. Transformation models of this form are commonly assumed in economics, including, e.g., standard specifications of duration models and hedonic pricing models. Our test statistic is asymptotically normal under local alternatives and consistent against nonparametric alternatives. Monte Carlo experiments show that our test performs well in finite samples. We apply our results to test for specifications of generalized accelerated failure-time (GAFT) models of the duration of strikes and of marriages. Keywords: additivity, control variable, endogenous variable, monotonicity, nonparametric nonseparable model, hazard model, specification test, transformation model, unobserved heterogeneity Classification-JEL: C12, C14 Series: Boston College Working Papers in Economics Number: 817 Creation-Date: 20121224 Revision-Date: 20130501 File-URL: http://fmwww.bc.edu/EC-P/wp817.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:817 Template-Type: ReDIF-Paper 1.0 Title: Identification of Average Random Coefficients under Magnitude and Sign Restrictions on Confounding Author-Name: Karim Chalak Author-X-Name-First: Karim Author-X-Name-Last: Chalak Author-Email: chalak@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Person: pch561 Abstract: This paper studies measuring the average effects of X on Y in a structural system with random coefficients and confounding. We do not require (conditionally) exogenous regressors or instruments. Using proxies W for the confounders U, we ask how do the average direct effects of U on Y compare in magnitude and sign to those of U on W. Exogeneity and equi- or proportional confounding are limit cases yielding full identification. Alternatively, the elements of beta-hat are partially identified in a sharp bounded interval if W is sufficiently sensitive to U, and sharp upper or lower bounds may obtain otherwise. We extend this analysis to accommodate conditioning on covariates and a semiparametric separable specification as well as a panel structure and proxies included in the Y equation. After studying estimation and inference, we apply this method to study the financial return to education and the black-white wage gap. Keywords: causality, confounding, endogeneity, omitted variable, partial identification, proxy Classification-JEL: C31, C33, C36 Series: Boston College Working Papers in Economics Number: 816 Creation-Date: 20121204 File-URL: http://fmwww.bc.edu/EC-P/wp816.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:816 Template-Type: ReDIF-Paper 1.0 Title: Two-Sided Matching via Balanced Exchange Author-Name: Umut Mert Dur Author-X-Name-First: Umut Author-X-Name-Last: Dur Author-Email: umutdur@gmail.com Author-WorkPlace-Name: University of Texas at Austin Author-Name: M. Utku Ünver Author-X-Name-First: M. Author-X-Name-Last: Ünver Author-Person: pun2 Author-Workplace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: We introduce a new matching model to mimic two-sided exchange programs such as tuition and worker exchanges, in which export-import balances are required for longevity of programs. These exchanges use decentralized markets, making it difficult to achieve this goal. We introduce the two-sided top-trading-cycles, the unique mechanism that is balanced-efficient, worker-strategy-proof, acceptable, individually rational, and respecting priority bylaws regarding worker eligibility. Moreover, it encourages exchange, because full participation is the dominant strategy for firms. We extend it to dynamic settings permitting tolerable yearly imbalances and demonstrate that its regular and tolerable versions perform considerably better than models of current practice. Series: Boston College Working Papers in Economics Number: 815 Creation-Date: 20121125 Revision-Date: 20180228 Keywords: Market Design, Matching Theory, Tuition Exchange, Balanced Exchange, Two–sided Matching, Two–sided Top Trading Cycles Classification-JEL: C71, C78, D71, D78 Note: previously circulated as "Two-Sided Matching via Balanced Exchange: Tuition and Worker Exchanges" Publication-Status: forthcoming, Journal of Political Economy File-URL: http://fmwww.bc.edu/EC-P/wp815.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:815 Template-Type: ReDIF-Paper 1.0 Title: The precaution of the rich and poor Author-Name: Scott Fulford Author-X-Name-First: Scott Author-X-Name-Last: Fulford Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Person: pfu103 Abstract: Do households use savings to buffer against income fluctuations? Despite its common use to understand household savings decisions, the evidence for the buffer-stock model is surprisingly weak and inconsistent. This paper develops new testable implications based on a property of the model that the assets that households target for precautionary reasons should encapsulate all preferences and risks and the target should scale one for one with permanent income. I test these implications using the Survey of Consumer Finances in the United States. Those with incomes over $60,000 fit the model predictions very well, but below $60,000 households become increasingly precautionary. Income uncertainty is unrelated to the level of precaution. Moreover, households hold substantially weaker precautionary tendencies than standard models with yearly income shocks predict. Instead I propose and estimate a model of monthly disposable income shocks and a minimum subsistence level that can accommodate these findings. Keywords: Buffer-stock model; Precaution; Household finance Classification-JEL: E21, D91 Series: Boston College Working Papers in Economics Number: 814 Creation-Date: 20120915 File-URL: http://fmwww.bc.edu/EC-P/wp814.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:814 Template-Type: ReDIF-Paper 1.0 Title: Terms of Endearment: An Equilibrium Model Of Sex and Matching Author-Name: Peter Arcidiacono Author-X-Name-First: Peter Author-X-Name-Last: Arcidiacono Author-Workplace-Name: Duke University Author-Person: par211 Author-Name: Andrew Beauchamp Author-X-Name-First: Andrew Author-X-Name-Last: Beauchamp Author-Person: pbe748 Author-Email: beauchaa@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Marjorie McElroy Author-X-Name-First: Marjorie Author-X-Name-Last: McElroy Author-Workplace-Name: Duke University Abstract: We develop a directed search model of relationship formation which can disentangle male and female preferences for types of partners and for different relationship terms using only a cross-section of observed matches. Individuals direct their search to a particular type of match on the basis of (i) the terms of the relationship, (ii) the type of partner, and (iii) the endogenously determined probability of matching. If men outnumber women, they tend to trade a low probability of a preferred match for a high probability of a less-preferred match; the analogous statement holds for women. Using data from National Longitudinal Study of Adolescent Health we estimate the equilibrium matching model with high school relationships. Variation in gender ratios is used to uncover male and female preferences. Estimates from the structural model match subjective data on whether sex would occur in one's ideal relationship. The equilibrium result shows that some women would ideally not have sex, but do so out of matching concerns; the reverse is true for men. Keywords: matching, relationships, sex Classification-JEL: J12 Series: Boston College Working Papers in Economics Number: 813 Creation-Date: 20120831 Revision-Date: 20130702 File-URL: http://fmwww.bc.edu/EC-P/wp813.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:813 Template-Type: ReDIF-Paper 1.0 Title: Abortion Costs, Separation and Non-Marital Childbearing Author-Name: Andrew Beauchamp Author-X-Name-First: Andrew Author-X-Name-Last: Beauchamp Author-Person: Author-Email: beauchaa@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: How do abortion costs affect non-marital childbearing? While greater access to abortion has the first-order effect of reducing childbearing among pregnant women, it could nonetheless lead to unintended consequences via effects on marriage market norms. Single motherhood could rise if lower-cost abortion makes it easier for men to avoid marriage. We identify the effect of abortion costs on separation, cohabitation and marriage following a birth by exploiting the "miscarriage-as-a-natural experiment" methodology in combination with changes in state abortion laws. Recent increases in abortion restrictions appear to have lead to a sizable decrease in a woman's chances of being single and increased the chances of cohabitation. The result underscores the importance of the marriage market search behavior of men and women, and the positive and negative effects of abortion laws on bargaining power for women who abort and give birth respectively. Keywords: Fertility; Non-marital Childbearing; Abortion Costs Classification-JEL: J12, J13 Series: Boston College Working Papers in Economics Number: 812 Creation-Date: 20120831 File-URL: http://fmwww.bc.edu/EC-P/wp812.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:812 Template-Type: ReDIF-Paper 1.0 Title: Regulation, Imperfect Competition, and the U.S. Abortion Market Author-Name: Andrew Beauchamp Author-X-Name-First: Andrew Author-X-Name-Last: Beauchamp Author-Person: Author-Email: beauchaa@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: The market for abortion in the U.S. has become increasingly concentrated in recent years and many states have tightened abortion regulations aimed at providers. Using unique data on abortion providers I estimate a dynamic model of entry, exit and service provision which captures the effect of regulation on provider behavior. High fixed costs explain the growth of large clinics and estimates show regulation increased entry costs for small providers. A simulation removing all regulations increases entry by smaller providers into incumbent-markets: competition increases as does the number of abortions. Targeted entry subsidies, however, increase access while only slightly increase abortion. Keywords: abortion, regulation Classification-JEL: J13, L11 Series: Boston College Working Papers in Economics Number: 811 Creation-Date: 20120817 Revision-Date: 20131031 File-URL: http://fmwww.bc.edu/EC-P/wp811.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:811 Template-Type: ReDIF-Paper 1.0 Title: An Overview of the Special Regressor Method Author-Name: Arthur Lewbel Author-X-Name-First: Arthur Author-X-Name-Last: Lewbel Author-Person: ple43 Author-Email: lewbel@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: This chapter provides background for understanding and applying special regressor methods. This chapter is intended for inclusion in the "Handbook of Applied Nonparametric and Semiparametric Econometrics and Statistics," Co-edited by Aman Ullah, Jeffrey Racine, and Liangjun Su, to be published by Oxford University Press. Keywords: special regressor method Classification-JEL: C14, D12, D13, C21 Series: Boston College Working Papers in Economics Number: 810 Creation-Date: 20120915 File-URL: http://fmwww.bc.edu/EC-P/wp810.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:810 Template-Type: ReDIF-Paper 1.0 Title: Sharing Rule Identification for General Collective Consumption Models Author-Name: Laurens Cherchye Author-WorkPlace-Name: CES, University of Leuven Author-Name: Bram De Rock Author-WorkPlace-Name: ECARES and ECORE, Université Libre de Bruxelles Author-Name: Arthur Lewbel Author-X-Name-First: Arthur Author-X-Name-Last: Lewbel Author-Person: ple43 Author-Email: lewbel@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Frederic Vermeulen Author-WorkPlace-Name: CentER, Tilburg University Abstract: We propose a method to identify bounds (i.e. set identification) on the sharing rule for a general collective household consumption model. Unlike the effects of distribution factors, it is well known that the level of the sharing rule cannot be uniquely identified without strong assumptions on preferences across households of different compositions. Our new results show that, though not point identified without these assumptions, bounds on the sharing rule can still be obtained. We get these bounds by applying revealed preference restrictions implied by the collective model to the household’s continuous aggregate demand functions. We obtain informative bounds even if nothing is known about whether each good is public, private, or assignable within the household, though having such information tightens the bounds. An empirical application demonstrates the practical usefulness of our method. Keywords: collective model, consumer demand, revealed preferences, sharing rule, identification, bounds Classification-JEL: D11, D12, D13, C14, C30 Series: Boston College Working Papers in Economics Number: 809 Creation-Date: 20120515 Revision-Date: 20130701 File-URL: http://fmwww.bc.edu/EC-P/wp809.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:809 Template-Type: ReDIF-Paper 1.0 Title: Identification and Estimation of Games with Incomplete Information Using Excluded Regressors Author-Name: Arthur Lewbel Author-X-Name-First: Arthur Author-X-Name-Last: Lewbel Author-Person: ple43 Author-Email: lewbel@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Xun Tang Author-Workplace-Name: University of Pennsylvania Abstract: The existing literature on binary games with incomplete information assumes that either payoff functions or the distribution of private information are finitely parameterized to obtain point identification. In contrast, we show that, given excluded regressors, payoff functions and the distribution of private information can both be nonparametrically point identified. An excluded regressor for player i is a sufficiently varying state variable that does not affect other players' utility and is additively separable from other components in i's payoff. We show how excluded regressors satisfying these conditions arise in contexts such as entry games between firms, as variation in observed components of fixed costs. Our identification proofs are constructive, so consistent nonparametric estimators can be readily based on them. For a semiparametric model with linear payoffs, we propose root-N consistent and asymptotically normal estimators for parameters in players' payoffs. Finally, we extend our approach to accommodate the existence of multiple Bayesian Nash equilibria in the data-generating process without assuming equilibrium selection rules. Keywords: Games with Incomplete Information, Excluded Regressors, Nonparametric Identification, Semiparametric Estimation, Multiple Equilibria. Classification-JEL: C14, C51, D43 Series: Boston College Working Papers in Economics Number: 808 Creation-Date: 20120821 Revision-Date: 20130305 File-URL: http://fmwww.bc.edu/EC-P/wp808.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:808 Template-Type: ReDIF-Paper 1.0 Title: A Simple Estimator for Binary Choice Models With Endogenous Regressors Author-Name: Yingying Dong Author-X-Name-First: Yingying Author-X-Name-Last: Dong Author-Workplace-Name: California State University, Irvine Author-Person: pdo242 Author-Name: Arthur Lewbel Author-X-Name-First: Arthur Author-X-Name-Last: Lewbel Author-Person: ple43 Author-Email: lewbel@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: This paper provides a few variants of a simple estimator for binary choice models with endogenous or mismeasured regressors, or with heteroskedastic errors, or with panel fixed effects. Unlike control function methods, which are generally only valid when endogenous regressors are continuous, the estimators proposed here can be used with limited, censored, continuous, or discrete endogenous regressors, and they allow for latent errors having heteroskedasticity of unknown form, including random coefficients. The variants of special regressor based estimators we provide are numerically trivial to implement. We illustrate these methods with an empirical application estimating migration probabilities within the US. Keywords: Binary choice, Binomial response, Endogeneity, Measurement error, Heteroskedasticity, Discrete endogenous regressor, Censored regressor, Random coefficients, Identification, Latent variable model. Classification-JEL: C25, C26 Series: Boston College Working Papers in Economics Number: 807 Creation-Date: 20120615 File-URL: http://fmwww.bc.edu/EC-P/wp807.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:807 Template-Type: ReDIF-Paper 1.0 Title: Designing for Diversity: Matching with Slot-Specific Priorities Author-Name: Scott Duke Kominers Author-X-Name-First: Scott Author-X-Name-Last: Kominers Author-Workplace-Name: Becker Friedman Institute, University of Chicago Author-Name: Tayfun Sönmez Author-X-Name-First: Tayfun Author-X-Name-Last: Sönmez Author-Email: sonmezt@bc.edu Author-Person: psi57 Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: To encourage diversity, branches may vary contracts' priorities across slots. The agents who match to branches, however, have preferences only over match partners and contractual terms. Ad hoc approaches to resolving agents' indifferences across slots in the Chicago and Boston school choice programs have introduced biases, which can be corrected with more careful market design. Slot-specific priorities can fail the substitutability condition typically crucial for outcome stability. Nevertheless, an embedding into a one-to-one agent--slot matching market shows that stable outcomes exist and can be found by a cumulative offer mechanism that is strategy-proof and respects unambiguous improvements in priority. Classification-JEL: C78, D63, D78 Series: Boston College Working Papers in Economics Number: 806 Creation-Date: 20120702 Keywords: Market Design, Matching with Contracts, Stability, Strategy-Proofness, School Choice, Affirmative Action File-URL: http://fmwww.bc.edu/EC-P/wp806.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:806 Template-Type: ReDIF-Paper 1.0 Title: The Importance of Irrelevance of Rejected Contracts in Matching under Weakened Substitutes Conditions Author-Name: Orhan Aygün Author-X-Name-First: Orhan Author-X-Name-Last: Aygün Author-Workplace-Name: Boston College Author-Email: aygun@bc.edu Author-Name: Tayfun Sönmez Author-X-Name-First: Tayfun Author-X-Name-Last: Sönmez Author-Email: sonmezt@bc.edu Author-Person: psi57 Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: We show that Hatfield and Kojima (2010) inherits a critical ambiguity from its predecessor Hatfield and Milgrom (2005), and clearing this ambiguity has strong implications for the paper. Of the two potential remedies, the first one results in the failure of all theorems except one in the absence of an additional irrelevance of rejected contracts (IRC) condition, whereas the second remedy eliminates the transparency of the results, reduces the scope of the model, and contradicts authors' interpretation of the nature of their contributions. Fortunately all results are restored when IRC is explicitly assumed under the first remedy. Classification-JEL: C78, D63, D78 Series: Boston College Working Papers in Economics Number: 805 Creation-Date: 20120630 Keywords: Matching with Contracts, Stability, Market Design File-URL: http://fmwww.bc.edu/EC-P/wp805.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:805 Template-Type: ReDIF-Paper 1.0 Title: Matching with Contracts: The Critical Role of Irrelevance of Rejected Contracts Author-Name: Orhan Aygün Author-X-Name-First: Orhan Author-X-Name-Last: Aygün Author-Workplace-Name: Boston College Author-Email: aygun@bc.edu Author-Name: Tayfun Sönmez Author-X-Name-First: Tayfun Author-X-Name-Last: Sönmez Author-Email: sonmezt@bc.edu Author-Person: psi57 Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: We show that an ambiguity in setting the primitives of the matching with contracts model by Hatfield and Milgrom (2005) has serious implications for the model. Of the two ways to clear the ambiguity, the first (and what we consider more "clean") remedy renders several of the results of the paper invalid in the absence of an additional irrelevance of removed contracts condition implicitly assumed throughout the paper, whereas the second remedy results in the lack of transparency in presentation of results while at the same time reducing the scope of the analysis with no clear benefit. Classification-JEL: C78, D63, D78 Series: Boston College Working Papers in Economics Number: 804 Creation-Date: 20120531 Keywords: Matching with Contracts, Stability, Market Design File-URL: http://fmwww.bc.edu/EC-P/wp804.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:804 Template-Type: ReDIF-Paper 1.0 Title: Public Communication and Information Acquisition Author-Name: Ryan Chahrour Author-X-Name-First: Ryan Author-X-Name-Last: Chahrour Author-Person: pch1111 Author-Email: ryan.chahrour@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: This paper models the tradeoff, perceived by central banks and other public actors, between providing the public with useful information and the risk of overwhelming it with excessive communication. An information authority chooses how many signals to provide regarding an aggregate state and agents respond by choosing how many signals to observe. When agents desire coordination, the number of signals they acquire may decrease in the number released. The optimal quantity of communication is positive, but does not maximize agents' acquisition of information. In contrast to a model without information choice, the authority always prefers to provide more precise signals. Classification-JEL: E50, E58, E60, D83 Keywords: Transparency, Central Bank Communication, Monetary Policy, Global Games, Information Acquisition Publication-Status: published, American Economic Journal: Macroeconomics, 6:3, 73-101, 2014 Series: Boston College Working Papers in Economics Number: 803 Creation-Date: 20120724 File-URL: http://fmwww.bc.edu/EC-P/wp803.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:803 Template-Type: ReDIF-Paper 1.0 Title: A "Working" Solution to the Question of Nominal GDP Targeting Author-Name: Michael T. Belongia Author-X-Name-First: Michael Author-X-Name-Last: Belongia Author-Workplace-Name: University of Mississippi Author-Name: Peter N. Ireland Author-X-Name-First: Peter Author-X-Name-Last: Ireland Author-Person: pir1 Author-Email: peter.ireland@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: Although a number of economists have tried to revive the idea of nominal GDP targeting since the financial market collapse of 2008, relatively little has been offered in terms of a specific framework for how this objective might be achieved in practice. In this paper we adopt a strategy outlined by Holbrook Working (1923) and employed, with only minor modifications, by Hallman, et al. (1991) in the P-Star model. We then present a series of theoretical and empirical results to show that Divisia monetary aggregates can be controlled by the Federal Reserve and that the trend velocities of these aggregates, by virtue of the properties of superlative indexes, exhibit the stability required to make long-run targeting feasible. Classification-JEL: E58, E52, E51 Keywords: nominal GDP targeting, Holbrook Working, P-Star Series: Boston College Working Papers in Economics Number: 802 Creation-Date: 20120630 Revision-Date: 20130104 File-URL: http://fmwww.bc.edu/EC-P/wp802.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:802 Template-Type: ReDIF-Paper 1.0 Title: Quantitative Easing: Interest Rates and Money in the Measurement of Monetary Policy Author-Name: Michael T. Belongia Author-X-Name-First: Michael Author-X-Name-Last: Belongia Author-Workplace-Name: University of Mississippi Author-Name: Peter N. Ireland Author-X-Name-First: Peter Author-X-Name-Last: Ireland Author-Person: pir1 Author-Email: peter.ireland@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: Over the last twenty-five years, a set of influential studies has placed interest rates at the heart of analyses that interpret and evaluate monetary policies. In light of this work, the Federal Reserve’s recent policy of "quantitative easing," with its goal of affecting the supply of liquid assets, appears as a radical break from standard practice. Superlative (Divisia) measures of money, however, often help in forecasting movements in key macroeconomic variables, and the statistical fit of a structural vector autoregression deteriorates significantly if such measures of money are excluded when identifying monetary policy shocks. These results cast doubt on the adequacy of conventional models that focus on interest rates alone. They also highlight that all monetary disturbances have an important "quantitative" component, which is captured by movements in a properly measured monetary aggregate. Classification-JEL: E51, E52, E58 Keywords: quantitative easing, interest rates, Divisia index, monetary policy Series: Boston College Working Papers in Economics Number: 801 Creation-Date: 20120618 File-URL: http://fmwww.bc.edu/EC-P/wp801.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:801 Template-Type: ReDIF-Paper 1.0 Title: Recursive Ambiguity and Machina's Examples Author-Name: David Dillenberger Author-X-Name-First: David Author-X-Name-Last: Dillenberger Author-Workplace-Name: University of Pennsylvania Author-Email: ddill@sas.upenn.edu Author-Name: Uzi Segal Author-X-Name-First: Uzi Author-X-Name-Last: Segal Author-Person: pse40 Author-Email: uzi.segal@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Series: Boston College Working Papers in Economics Number: 800 Abstract: Machina (2009, 2012) lists a number of situations where standard models of ambiguity aversion are unable to capture plausible features of ambiguity attitudes. Most of these problems arise in choice over prospects involving three or more outcomes. We show that the recursive non-expected utility model of Segal (1987) is rich enough to accommodate all these situations. Creation-Date: 20120520 Classification-JEL: D81 Keywords: Ambiguity, Ellsberg paradox, Choquet expected utility, recursive non-expected utility File-URL: http://fmwww.bc.edu/EC-P/wp800.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:800 Template-Type: ReDIF-Paper 1.0 Title: Demand Estimation Under Incomplete Product Availability Author-Name: Christopher T. Conlon Author-X-Name-First: Christopher Author-X-Name-Last: Conlon Author-Person: pco543 Author-Email: cconlon@stern.nyu.edu Author-WorkPlace-Name: New York University, Stern School Author-Name: Julie Holland Mortimer Author-X-Name-First: Julie Author-X-Name-Last: Mortimer Author-Person: pmo678 Author-Email: julie.mortimer.2@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Series: Boston College Working Papers in Economics Number: 799 Abstract: Incomplete product availability is an important feature of many markets, and ignoring changes in availability may bias demand estimates. We study a new dataset from a wireless inventory system on vending machines to track product availability every four hours. The data allow us to account for product availability when estimating demand, and provide valuable variation for identifying substitution patterns when products stock out. We develop a procedure that allows for changes in product availability when availability is only observed periodically. We find significant differences in demand estimates: the corrected model predicts significantly larger impacts of stock-outs on profitability. Creation-Date: 20100503 Revision-Date: 20120807 Classification-JEL: C8, C23, C25, L8, L81 Keywords: demand estimation, product availability, EM algorithm, field experiment Publication-Status: published in American Economic Journal: Microeconomics, 2013, 5:4, 1-3 File-URL: http://fmwww.bc.edu/EC-P/wp799.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:799 Template-Type: ReDIF-Paper 1.0 Title: Effects of Product Availability: Experimental Evidence Author-Name: Christopher T. Conlon Author-X-Name-First: Christopher Author-X-Name-Last: Conlon Author-Person: pco543 Author-Email: cconlon@stern.nyu.edu Author-WorkPlace-Name: New York University, Stern School Author-Name: Julie Holland Mortimer Author-X-Name-First: Julie Author-X-Name-Last: Mortimer Author-Person: pmo678 Author-Email: julie.mortimer.2@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Series: Boston College Working Papers in Economics Number: 798 Abstract: Product availability impacts many industries such as transportation, events, and retail, yet little empirical evidence documents the importance of stocking decisions for firm profits, vertical relationships, or consumers. We conduct several experiments, exogenously removing top-selling products from a set of vending machines and analyzing substitution patterns and profit impacts of the changed product availability using non- parametric analyses and structural demand estimation. We find substantial switching to alternate products, and evidence of misaligned incentives between upstream and downstream firms in the choice of which products to carry. We discuss the trade-offs of both empirical approaches for analyzing product availability effects generally. Creation-Date: 20101009 Classification-JEL: Keywords: File-URL: http://fmwww.bc.edu/EC-P/wp798.pdf File-Format: application/pdf File-Function: main text File-URL: http://fmwww.bc.edu/EC-P/wp798app.pdf File-Format: application/pdf File-Function: appendix Handle: RePEc:boc:bocoec:798 Template-Type: ReDIF-Paper 1.0 Title: Utilitarianism and Discrimination Author-Name: Alon Harel Author-X-Name-First: Alon Author-X-Name-Last: Harel Author-Email: msalon@huji.ac.il Author-WorkPlace-Name: Hebrew University School of Law Author-Name: Uzi Segal Author-X-Name-First: Uzi Author-X-Name-Last: Segal Author-Person: pse40 Author-Email: uzi.segal@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Series: Boston College Working Papers in Economics Number: 797 Abstract: Since Becker (1971), a common argument against asymmetric norms that promote minority rights over those of the majority is that such policies reduce total welfare. While this may be the case, we show that there are simple environments where aggregate sum of individual utilities is actually maximized under asymmetric norms that favor minorities. We thus maintain that without information regarding individual utilities one cannot reject or promote segregation-related policies based on utilitarian arguments. Creation-Date: 20120219 Classification-JEL: Keywords: Utilitarianism, discrimination, segregation, minority and majority rights File-URL: http://fmwww.bc.edu/EC-P/wp797.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:797 Template-Type: ReDIF-Paper 1.0 Title: Transitive Regret over Statistically Independent Lotteries Author-Name: Uzi Segal Author-X-Name-First: Uzi Author-X-Name-Last: Segal Author-Person: pse40 Author-Email: uzi.segal@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Series: Boston College Working Papers in Economics Number: 796 Abstract: Preferences may arise from regret, i.e., from comparisons with alternatives forgone by the decision maker. We show that when the choice set consists of pairwise statistically independent lotteries, transitive regret-based behavior is consistent with betweenness preferences and with a family of preferences that is characterized by a consistency property. Examples of consistent preferences include CARA, CRRA, and anticipated utility. Creation-Date: 20120402 Classification-JEL: Keywords: Regret, transitivity, non-expected utility File-URL: http://fmwww.bc.edu/EC-P/wp796.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:796 Template-Type: ReDIF-Paper 1.0 Title: Gold Standard Gravity Author-Name: James E. Anderson Author-X-Name-First: James Author-X-Name-Last: Anderson Author-Person: pan2 Author-Email: anderson@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Yoto V. Yotov Author-X-Name-First: Yoto Author-X-Name-Last: Yotov Author-Workplace-Name: Drexel University Author-Person: pyo93 Abstract: This paper provides striking confirmation of the restrictions of the structural gravity model of trade. Structural forces predicted by theory explain 95% of the variation of the fixed effects used to control for them in the recent gravity literature, fixed effects that in principle could reflect other forces. This validation opens avenues to inferring unobserved sectoral activity and multilateral resistance variables by equating fixed effects with structural gravity counterparts. Our findings also provide important validation of a host of general equilibrium comparative static exercises based on the structural gravity model. Series: Boston College Working Papers in Economics Number: 795 Creation-Date: 20120130 Keywords: Gravity, Trade, Structural Gravity, Multilateral Resistance Classification-JEL: F10, F15, R10, R40 File-URL: http://fmwww.bc.edu/EC-P/wp795.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:795 Template-Type: ReDIF-Paper 1.0 Title: R&D Expenditures and Geographical Sales Diversification Author-Name: Christopher F Baum Author-X-Name-First: Christopher Author-X-Name-Last: Baum Author-Person: pba1 Author-Email: baum@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Workplace-Name: DIW Berlin Author-Name: Mustafa Caglayan Author-X-Name-First: Mustafa Author-X-Name-Last: Caglayan Author-Person: pca30 Author-Workplace-Name: Heriot-Watt University Author-Email: m.caglayan@hw.ac.uk Author-Name: Oleksandr Talavera Author-X-Name-First: Oleksandr Author-X-Name-Last: Talavera Author-Person: pta65 Author-Email: oleksandr.talavera@googlemail.com Author-Workplace-Name: University of Sheffield Abstract: This paper empirically examines the role of diversification in export markets on firm-level R&D activities. We show that geographical sales diversification across different regions of the world induces UK firms to increase their R&D expenditures, as firms must innovate and develop new products to maintain a competitive edge over their rivals. This finding is robust to a battery of sensitivity checks. Furthermore, we find no evidence of reverse causality between R&D and sales diversification. Keywords: R&D investment, Export diversification, Foreign direct investment, Cash holdings Classification-JEL: G21, G32, C24 Series: Boston College Working Papers in Economics Number: 794 Note: Previously circulated as "R&D Expenditures and Export Sales Diversification" Publication-Status: published, Manchester School, 84:2, 197-221, 2016 Creation-Date: 20120330 Revision-Date: 20121112 File-URL: http://fmwww.bc.edu/EC-P/wp794.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:794 Template-Type: ReDIF-Paper 1.0 Title: Productivity and the Welfare of Nations Author-Name: Susanto Basu Author-X-Name-First: Susanto Author-X-Name-Last: Basu Author-Person: pba274 Author-WorkPlace-Name: Boston College Author-WorkPlace-Name: NBER Author-Name: Luigi Pascali Author-X-Name-First: Luigi Author-X-Name-Last: Pascali Author-Person: ppa551 Author-Email: luigi.pascali@bc.edu Author-WorkPlace-Name: Boston College Author-Name: Fabio Schiantarelli Author-X-Name-First: Fabio Author-X-Name-Last: Schiantarelli Author-Email: schianta@bc.edu Author-Person: psc8 Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Workplace-Name: IZA Author-Name: Luis Serven Author-X-Name-First: Luis Author-X-Name-Last: Serven Author-WorkPlace-Name: World Bank Abstract: We show how to relate the welfare of a country's infinitely-lived representative consumer to observable aggregate data. To a first order, welfare is summarized by total factor productivity and by the capital stock per capita. These variables suffice to calculate welfare changes within a country, as well as welfare differences across countries. The result holds regardless of the type of production technology and the degree of market competition. It applies to open economies as well, if total factor productivity is constructed using domestic absorption, instead of gross domestic product, as the measure of output. It also requires that total factor productivity be constructed with prices and quantities as perceived by consumers, not firms. Thus, factor shares need to be calculated using after-tax wages and rental rates and they will typically sum to less than one. These results are used to calculate welfare gaps and growth rates in a sample of developed countries with high-quality total factor productivity and capital data. Under realistic scenarios, the U.K. and Spain had the highest growth rates of welfare during the sample period 1985-2005, but the U.S. had the highest level of welfare. Series: Boston College Working Papers in Economics Number: 793 Creation-Date: 20120328 Revision-Date: 20160218 Keywords: Productivity, Welfare, TFP, Solow Residual Classification-JEL: D24, D90, E20, O47 File-URL: http://fmwww.bc.edu/EC-P/wp793.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:793 Template-Type: ReDIF-Paper 1.0 Title: Dynamic Wage and Employment Effects of Elder Parent Care Author-Name: Meghan Skira Author-X-Name-First: Meghan Author-X-Name-Last: Skira Author-Email: Skira@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: This paper formulates and estimates a dynamic discrete choice model of elder parent care and work to analyze how caregiving affects a woman’s current and future labor force participation and wages. Intertemporal tradeoffs, such as decreased future earning capacity due to a current reduction in labor market work, are central to the decision to provide care. The existing literature, however, overlooks such long-term considerations. I depart from the previous literature by modeling caregiving and work decisions in an explicitly intertemporal framework. The model incorporates dynamic elements such as the health of the elderly parent, human capital accumulation and job offer availability. I estimate the model on a sample of women from the Health and Retirement Study by efficient method of moments. The estimates indicate that intertemporal tradeoffs matter considerably. In particular, women face low probabilities of returning to work or increasing work hours after a caregiving spell. Using the estimates, I simulate several government sponsored elder care policy experiments: a longer unpaid leave than currently available under the Family and Medical Leave Act of 1993; a paid work leave; and a caregiver allowance. The leaves encourage more work among intensive care providers since they guarantee a woman can return to her job, while the caregiver allowance discourages work. A comparison of the welfare gains generated by the policies shows that half the value of the paid leave can be achieved with the unpaid leave, and the caregiver allowance generates gains comparable to the unpaid leave. Keywords: Informal care, employment, dynamic discrete choice, structural estimation, Fam- ily and Medical Leave Act Classification-JEL: J14, J18, J22, C51 Series: Boston College Working Papers in Economics Number: 792 Creation-Date: 20120327 Revision-Date: 20130816 File-URL: http://fmwww.bc.edu/EC-P/wp792.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:792 Template-Type: ReDIF-Paper 1.0 Title: Unobserved Preference Heterogeneity in Demand Using Generalized Random Coefficients Author-Name: Arthur Lewbel Author-X-Name-First: Arthur Author-X-Name-Last: Lewbel Author-Person: ple43 Author-Email: lewbel@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Krishna Pendakur Author-X-Name-First: Krishna Author-X-Name-Last: Pendakur Author-Workplace-Name: Simon Fraser University Abstract: We propose a generalization of random coefficients models, in which the regression model is an unknown function of a vector of regressors, each of which is multiplied by an unobserved error. We also investigate a more restrictive model which is additive (or additive with interactions) in unknown functions of each regressor multiplied by its error. We show nonparametric identification of these models. In addition to providing a natural generalization of random coefficients, we provide economic motivations for the model based on demand system estimation. In these applications, the random coefficients can be interpreted as random utility parameters that take the form of Engel scales or Barten scales, which in the past were estimated as deterministic preference heterogeneity or household technology parameters. We apply these results to consumer surplus and related welfare calculations. Keywords: unoberved heterogeneity, nonseparable errors, random utility parameters, random coefficients, equivalence scales, consumer surplus, welfare calculations. Classification-JEL: C14, D12, D13, C21 Series: Boston College Working Papers in Economics Number: 791 Note: Previously circulated as Generalized Random Coefficients With Equivalence Scale Applications Creation-Date: 20120215 Revision-Date: 20130701 File-URL: http://fmwww.bc.edu/EC-P/wp791.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:791 Template-Type: ReDIF-Paper 1.0 Title: Nonparametric Errors in Variables Models with Measurement Errors on both sides of the Equation Author-Name: Michele De Nadai Author-X-Name-First: Michele Author-X-Name-Last: De Nadai Author-Workplace-Name: University of Padova Author-Name: Arthur Lewbel Author-X-Name-First:Arthur Author-X-Name-Last: Lewbel Author-Person: ple43 Author-Email: lewbel@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: Measurement errors are often correlated, as in surveys where respondents' biases or tendencies to err affect multiple reported variables. We extend Schennach (2007) to identify moments of the conditional distribution of a true Y given a true X when both are measured with error, the measurement errors in Y and X are correlated, and the true unknown model of Y given X has nonseparable model errors. We also provide a nonparametric sieve estimator of the model, and apply it to nonparametric Engel curve estimation. In our application measurement errors on the expenditures of a good Y are by construction correlated with measurement errors in total expenditures X. This feature of most consumption data sets has been ignored in almost all previous demand applications. We find accounting for this feature casts doubt on Hildenbrand's (1994) "increasing dispersion" assumption. Keywords: Engel curve; errors-in-variables model; Fourier transform; generalized function; sieve estimation. Classification-JEL: C10, C14, D12 Series: Boston College Working Papers in Economics Number: 790 Creation-Date: 20120115 Revision-Date: 20130701 File-URL: http://fmwww.bc.edu/EC-P/wp790.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:790 Template-Type: ReDIF-Paper 1.0 Title: Comparing Features of Convenient Estimators for Binary Choice Models With Endogenous Regressors Author-Name: Yingying Dong Author-X-Name-First: Yingying Author-X-Name-Last: Dong Author-Workplace-Name: California State University, Irvine Author-Person: pdo242 Author-Name: Arthur Lewbel Author-X-Name-First: Arthur Author-X-Name-Last: Lewbel Author-Person: ple43 Author-Email: lewbel@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Thomas Tao Yang Author-Workplace-Name: Boston College Abstract: We discuss the relative advantages and disadvantages of four types of convenient estimators of binary choice models when regressors may be endogenous or mismeasured, or when errors are likely to be heteroskedastic. For example, such models arise when treatment is not randomly assigned and outcomes are binary. The estimators we compare are the two stage least squares linear probability model, maximum likelihood estimation, control function estimators, and special regressor methods. We specifically focus on models and associated estimators that are easy to implement. Also, for calculating choice probabilities and regressor marginal effects, we propose the average index function (AIF), which, unlike the average structural function (ASF), is always easy to estimate. Keywords: Binary choice, Binomial Response, Endogeneity, Measurement Error, Heteroskedasticity, discrete endogenous, censored, random coefficients, Identification, Latent Variable Model. Classification-JEL: C25, C26 Series: Boston College Working Papers in Economics Number: 789 Creation-Date: 20120215 Revision-Date: 20120515 Publication-Status: published, Canadian Journal of Economics, 2012, 45:3, 809-829 File-URL: http://fmwww.bc.edu/EC-P/wp789.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:789 Template-Type: ReDIF-Paper 1.0 Author-Name: Georg H. Strasser Author-X-Name-First: Georg Author-X-Name-Last: Strasser Author-Person: pst327 Author-Email: Georg.Strasser@bc.edu Author-Workplace-Name: Department of Economics, Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Title: Exchange Rate Pass-Through and Credit Constraints: Firms Price to Market as Long as They Can Abstract: The macroeconomic evidence on the short-term impact of exchange rates on exports and prices is notoriously weak. In this paper I examine the micro-foundations of this disconnect by looking at firms' export and price setting decisions in response to fluctuations in exchange rates and credit conditions using German firm survey data. Firm- level data on pricing and export expectations enables me to measure the instantaneous response of each firm to changing financial constraints and the EUR/USD exchange rate, which avoids endogeneity issues. I find that primarily large firms cause the exchange rate "puzzles" in aggregate data. The exchange rate disconnect disappears for financially constrained firms. For these firms, the pass-through rate of exchange rate changes to prices is more than twice the rate of unconstrained firms. Similarly, their export volumes are about twice as sensitive to exchange rate fluctuations. Credit therefore affects not only exports via trade finance, but also international relative prices by constraining the scope of feasible pricing policies. The effect of borrowing constraints is particularly strong during the recent financial crisis. Creation-Date: 20111021 Revision-Date: 20120213 File-URL: http://fmwww.bc.edu/EC-P/wp788.pdf File-Format: application/pdf File-Function: main text Classification-JEL: F31, E44, F40, E32, G21 Publication-Status: published, Journal of Monetary Economics, 2013, 60:1, 25-38 Series: Boston College Working Papers in Economics Number: 788 Keywords: exchange rate pass-through, exchange rate disconnect, financing constraints, pricing to market, exports, credit crunch, trade collapse, law of one price, trade finance Handle: RePEc:boc:bocoec:788 Template-Type: ReDIF-Paper 1.0 Title: Menu Auctions with Non-Transferable Utilities and Budget Constraints Author-Name: Chiu Yu Ko Author-X-Name-First: Chiu Author-X-Name-Last: Ko Author-Email: kocb@bc.edu Author-Person: pko385 Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: This paper extends Bernheim and Whinston's (1986) menu auction model under transferable utilities to a framework with non-transferable utilities and budget constraints. Under appropriate definitions of equilibria, it is shown that every truthful Nash equilibrium (TNE) is a coalition-proof Nash equilibrium (CPNE) and that the set of TNE payoffs and the set of CPNE payoffs are equivalent, as in a transferable utility framework. The existence of a CPNE is assured in contrast with the possible non-existence of Nash equilibrium under the definition by Dixit, Grossman, and Helpman (1997). Moreover, the set of CPNE payoffs is equivalent to the bidder-optimal weak core. Series: Boston College Working Papers in Economics Number: 787 Creation-Date: 20111020 Keywords: non-transferable utility, menu auction, coalition-proof Nash equilibrium, truthful Nash equilibrium Classification-JEL: C72, D79 File-URL: http://fmwww.bc.edu/EC-P/wp787.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:787 Template-Type: ReDIF-Paper 1.0 Title: The contextual effects of social capital on health: a cross-national instrumental variable analysis Author-Name: Daniel Kim Author-X-Name-First: Daniel Author-X-Name-Last: Kim Author-Email: dkim@rand.org Author-WorkPlace-Name: RAND Corporation Author-Name: Christopher F Baum Author-X-Name-First: Christopher Author-X-Name-Last: Baum Author-Person: pba1 Author-Email: baum@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Workplace-Name: DIW Berlin Author-Name: Michael Ganz Author-X-Name-First: Michael Author-X-Name-Last: Ganz Author-Workplace-Name: Outcomes Research, Abt Bio-Pharma Solutions, Inc. Author-Name: S.V. Subramanian Author-X-Name-First: S. Author-X-Name-Last: Subramanian Author-Workplace-Name: Department of Society, Human Development, and Health, Harvard School of Public Health Author-Name: Ichiro Kawachi Author-X-Name-First: Ichiro Author-X-Name-Last: Kawachi Author-Workplace-Name: Department of Society, Human Development, and Health, Harvard School of Public Health Abstract: Past observational studies of the associations of area-level/contextual social capital with health have revealed conflicting findings. However, interpreting this rapidly growing literature is difficult because estimates using conventional regression are prone to major sources of bias including residual confounding and reverse causation. Instrumental variable (IV) analysis can reduce such bias. Using data on up to 167,344 adults in 64 nations in the European and World Values Surveys and applying IV and ordinary least squares (OLS) regression, we estimated the contextual effects of country-level social trust on individual self-rated health. We further explored whether these associations varied by gender and individual levels of trust. Using OLS regression, we found higher average country-level trust to be associated with better self-rated health in both women (beta=0.051, 95% confidence interval 0.011 to 0.091, P=0.01) and men (beta=0.038, 0.0002 to 0.077, P=0.049). IV analysis yielded qualitatively similar results, although the estimates were more than double in size (in women, using country population density and corruption as instruments: beta=0.119, 0.028 to 0.209, P=0.005; in men: beta=0.115, 0.025 to 0.204, P=0.01). The estimated health effects of raising the percentage of a country's population that trusts others by 10 percentage points were at least as large as the estimated health effects of an individual developing trust in others. These findings were robust to alternative model specifications and instruments. Conventional regression and to a lesser extent IV analysis suggested that these associations are more salient in women and in women reporting social trust. In a large cross-national study, our findings, including those using instrumental variables, support the presence of beneficial effects of higher country-level trust on self-rated health. Past findings for contextual social capital using traditional regression may have underestimated the true associations. Given the close linkages between self-rated health and all-cause mortality, the public health gains from raising social capital within countries may be large. Keywords: social capital, social determinants of health, social environment, epidemiology, causal inference, instrumental variable Series: Boston College Working Papers in Economics Number: 786 Classification-JEL: I15, I18, C26 Publication-Status: published, Social Science & Medicine, 73:12, 1689-1697, 2011. Creation-Date: 20111010 File-URL: http://fmwww.bc.edu/EC-P/wp786.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:786 Template-Type: ReDIF-Paper 1.0 Title: Valuing Prearranged Paired Kidney Exchanges: A Stochastic Game Approach Author-Name: Murat Kurt Author-X-Name-First: Murat Author-X-Name-Last: Kurt Author-Email: muk7@pitt.edu Author-WorkPlace-Name: University of Pittsburgh Author-Name: Mark S. Roberts Author-X-Name-First: Mark Author-X-Name-Last: Roberts Author-Email: mroberts@pitt.edu Author-WorkPlace-Name: University of Pittsburgh Author-Name: Andrew J. Schaefer Author-X-Name-First: Andrew Author-X-Name-Last: Schaefer Author-Email: schaefer@ie.pitt.edu Author-WorkPlace-Name: University of Pittsburgh Author-Name: M. Utku Ünver Author-X-Name-First: M. Author-X-Name-Last: Ünver Author-Person: pun2 Author-Workplace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: End-stage renal disease (ESRD) is the ninth-leading cause of death in the U.S. Transplantation is the most viable renal replacement therapy for ESRD patients, but there is a severe disparity between the demand for kidneys for transplantation and the supply. This shortage is further complicated by incompatibilities in blood-type and antigen matching between patient-donor pairs. Paired kidney exchange (PKE), a cross-exchange of kidneys among incompatible patient-donor pairs, overcomes many difficulties in matching patients with incompatible donors. In a typical PKE, transplantation surgeries take place simultaneously so that no donor may renege after her intended recipient receives the kidney. Therefore, in a PKE, the occurrence of a transplantation requires compatibility among the pairs' willingnesses to exchange. We consider an arbitrary number of autonomous patients with probabilistically evolving health statuses in a prearranged PKE, and model their transplant timing decisions as a discrete-time non-zero-sum noncooperative stochastic game. We explore necessary and sufficient conditions for patients' decisions to be a stationary-perfect equilibrium, and formulate a mixed-integer linear programming representation of equilibrium constraints, which provides a characterization of the socially optimal stationary-perfect equilibria. We carefully calibrate our model using a large scale nationally representative clinical data, and empirically confirm that randomized strategies, which are less consistent with clinical practice and rationality of the patients, do not yield a significant social welfare gain over pure strategies. We also quantify the social welfare loss due to patient autonomy and demonstrate that maximizing the number of transplants may be undesirable. Our results highlight the importance of the timing of an exchange and the disease severity on matching patient-donor pairs. Series: Boston College Working Papers in Economics Number: 785 Creation-Date: 20111010 Revision-Date: 20111014 Keywords: medical decision making, paired kidney exchange, game theory, Markov decision processes, integer programming Classification-JEL: C78, I11 Handle: RePEc:boc:bocoec:785 Template-Type: ReDIF-Paper 1.0 Title: School Admissions Reform in Chicago and England: Comparing Mechanisms by their Vulnerability to Manipulation Author-Name: Parag A. Pathak Author-X-Name-First: Parag Author-X-Name-Last: Pathak Author-Workplace-Name: MIT Author-Name: Tayfun Sönmez Author-X-Name-First: Tayfun Author-X-Name-Last: Sönmez Author-Email: sonmezt@bc.edu Author-Person: psi57 Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: In Fall 2009, officials from Chicago Public Schools changed their assignment mechanism for coveted spots at selective college preparatory high schools midstream. After asking about 14,000 applicants to submit their preferences for schools under one mechanism, the district asked them to re-submit their preferences under a new mechanism. Officials were concerned that "high-scoring kids were being rejected simply because of the order in which they listed their college prep preferences" under the abandoned mechanism. What is somewhat puzzling is that the new mechanism is also manipulable. This paper introduces a method to compare mechanisms based on their vulnerability to manipulation. Under our notion, the old mechanism is more manipulable than the new Chicago mechanism. Indeed, the old Chicago mechanism is at least as manipulable as any other plausible mechanism. A number of similar transitions between mechanisms took place in England after the widely popular Boston mechanism was ruled illegal in 2007. Our approach provides support for these and other recent policy changes involving matching mechanisms. Series: Boston College Working Papers in Economics Number: 784 Creation-Date: 20110101 Keywords: student assignment, Boston mechanism, matching, strategy-proofness Classification-JEL: C78, D63, D78 File-URL: http://fmwww.bc.edu/EC-P/wp784.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:784 Template-Type: ReDIF-Paper 1.0 Title: Bidding for Army Career Specialties: Improving the ROTC Branching Mechanism Author-Name: Tayfun Sönmez Author-X-Name-First: Tayfun Author-X-Name-Last: Sönmez Author-Email: sonmezt@bc.edu Author-Person: psi57 Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: Motivated by historically low retention rates of graduates at USMA and ROTC, the Army recently introduced branch-for-service incentives programs where cadets could bid an additional three years of active duty service obligation to obtain higher priority for their desired career specialties. The full potential of this highly innovative program is not utilized, due to the ROTC's choice of a poorly behaved cadet-branch matching mechanism. Not only does the ROTC mechanism effectively block the access of a large fraction of moderately high-skilled cadets to key career branches, but it is also highly vulnerable to preference manipulation and encourages effort reduction, potentially compromising human capital accumulation of the Army. Building on recent advances in matching markets, we propose a design that eliminates each of these deficiencies and also benefits the Army by mitigating several policy problems that the Army has identified. In contrast to the ROTC mechanism, our design utilizes market principles more elaborately, and it can be interpreted as a hybrid between a market mechanism and a priority-based allocation mechanism. Series: Boston College Working Papers in Economics Number: 783 Creation-Date: 20110901 Keywords: Market Design, Matching with Contracts, Stability, Strategy-Proofness Classification-JEL: C78, D63, D78 File-URL: http://fmwww.bc.edu/EC-P/wp783.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:783 Template-Type: ReDIF-Paper 1.0 Title: Matching with (Branch-of-Choice) Contracts at United States Military Academy Author-Name: Tayfun Sönmez Author-X-Name-First: Tayfun Author-X-Name-Last: Sönmez Author-Email: sonmezt@bc.edu Author-Person: psi57 Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Tobias B. Switzer Author-X-Name-First: Tobias Author-X-Name-Last: Switzer Author-Workplace-Name: United States Air Force Abstract: Branch selection is a key decision in a cadet's military career. Cadets at USMA can increase their branch priorities at a fraction of slots by extending their service agreement. This real-life matching problem fills an important gap in market design literature. Although priorities fail a key substitutes condition, the agent-optimal stable mechanism is well-defined, and in contrast to the current USMA mechanism it is fair, stable, and strategy-proof. Adoption of this mechanism benefits cadets and the Army. This new application shows that matching with contracts model is practically relevant beyond traditional domains that satisfy the substitutes condition. Series: Boston College Working Papers in Economics Number: 782 Creation-Date: 20110501 Keywords: Market Design, Matching with Contracts, Stability, Strategy-Proofness Classification-JEL: C78, D63, D78 File-URL: http://fmwww.bc.edu/EC-P/wp782.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:782 Template-Type: ReDIF-Paper 1.0 Title: Altruistically Unbalanced Kidney Exchange Author-Name: Tayfun Sönmez Author-X-Name-First: Tayfun Author-X-Name-Last: Sönmez Author-Email: sonmezt@bc.edu Author-Person: psi57 Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: M. Utku Ünver Author-X-Name-First: M. Author-X-Name-Last: Ünver Author-Person: pun2 Author-Workplace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: Although a pilot national live-donor kidney exchange program was recently launched in the US, the kidney shortage is increasing faster than ever. A new solution paradigm is able to incorporate compatible pairs in exchange. In this paper, we consider an exchange framework that has both compatible and in- compatible pairs, and patients are indifferent over compatible pairs. Only two-way exchanges are permitted due to institutional constraints. We explore the structure of Pareto-efficient matchings in this framework. The mathematical structure of this model turns out to be quite novel. We show that under Pareto-efficient matchings, the same number of patients receive transplants, and it is possible to construct Pareto-efficient matchings that match the same incompatible pairs while matching the least number of compatible pairs. We extend the celebrated Gallai-Edmonds Decomposition in the combinatorial optimization literature to our new framework. We also conduct comparative static exercises on how this decomposition changes as new compatible pairs join the pool. Series: Boston College Working Papers in Economics Number: 781 Creation-Date: 20111001 Revision-Date: 20130630 Keywords: Kidney Exchange, Market Design, Matching Classification-JEL: C78, D78, D02, D63 File-URL: http://fmwww.bc.edu/EC-P/wp781.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:781 Template-Type: ReDIF-Paper 1.0 Title: Terms of Trade and Global Efficiency Effects of Free Trade Agreements, 1990-2002 Author-Name: James E. Anderson Author-X-Name-First: James Author-X-Name-Last: Anderson Author-Person: pan2 Author-Email: anderson@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Yoto V. Yotov Author-X-Name-First: Yoto Author-X-Name-Last: Yotov Author-Workplace-Name: Drexel University Author-Person: pyo93 Abstract: This paper infers the terms of trade effects of Free Trade Agreements (FTAs) with the structural gravity model. Using panel data methods to resolve two way causality between trade and FTAs, we estimate direct FTA effects on bilateral trade volume in 2 digit manufacturing goods from 1990-2002. We deduce the terms of trade changes implied by these volume effects for 40 countries plus a rest-of-the-world aggregate. Some gain over 10%, some lose less than 0.2%. Overall, using a novel measure of the change in iceberg melting, global efficiency rises 0.62%. Series: Boston College Working Papers in Economics Number: 780 Creation-Date: 20110929 Revision-Date: 20111011 Keywords: Free Trade Agreements, Gravity, Terms of Trade, Coefficient of Resource Utilization Classification-JEL: F13, F14, F16 File-URL: http://fmwww.bc.edu/EC-P/wp780.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:780 Template-Type: ReDIF-Paper 1.0 Title: Choosing a Licensee from Heterogeneous Rivals Author-Name: Anthony Creane Author-X-Name-First: Anthony Author-X-Name-Last: Creane Author-Workplace-Name: Michigan State University Author-Name: Chiu Yu Ko Author-Workplace-Name: National University of Singapore Author-X-Name-First: Chiu Author-X-Name-Last: Ko Author-Person: pko385 Author-Name: Hideo Konishi Author-X-Name-First: Hideo Author-X-Name-Last: Konishi Author-Person: pko35 Author-Email: konishih@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Series: Boston College Working Papers in Economics Number: 779 Abstract: We examine a firm that can license its production technology to a rival when firms are heterogeneous in production costs. We show that a complete technology transfer from one firm to another always increases joint profit under weakly concave demand when at least three firms remain in the industry. A jointly profitable transfer may reduce social welfare, although a jointly profitable transfer from the most efficient firm always increases welfare. We also consider two auction games under complete information: a standard first-price auction and a menu auction by Bernheim and Whinston (1986). With natural refinement of equilibria, we show that the resulting licensees are ordered by degree of efficiency: menu auction, simple auction, and joint-profit maximizing licensees, in (weakly) descending order. Classification-JEL: D4, L24, L4 Keywords: licensing, production costs, technology transfer, auction games Publication-Status: published, Games and Economic Behavior, 82, 254-268 (2013) Creation-Date: 20110930 Revision-Date: 20130406 File-URL: http://fmwww.bc.edu/EC-P/wp779.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:779 Template-Type: ReDIF-Paper 1.0 Title: Inverse Elasticity Rule in a Production Efficiency Problem Author-Name: Anthony Hannagan Author-Workplace-Name: Boston College Author-X-Name-First: Anthony Author-X-Name-Last: Hannagan Author-Name: Hideo Konishi Author-X-Name-First: Hideo Author-X-Name-Last: Konishi Author-Person: pko35 Author-Email: konishih@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Series: Boston College Working Papers in Economics Number: 778 Abstract: Diamond and Mirrlees (1971) and Dasgupta and Stiglitz (1972) show that production efficiency is achieved under the optimal commodity tax when profit income is zero. Here, we consider the simplest possible model to analyze production efficiency in the presence of profit income: a tax reform problem in an economy with a representative consumer, two goods, and two firms with decreasing returns to scale technologies. We show that differentiating a uniform producer tax according to the inverse elasticity rule, while keeping government revenue constant, reduces additional distortions caused by the presence of profit income and improves social welfare. Classification-JEL: H21 Keywords: production efficiency, inverse elasticity, profit income Creation-Date: 20110630 File-URL: http://fmwww.bc.edu/EC-P/wp778.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:778 Template-Type: ReDIF-Paper 1.0 Title: Entrepreneurial Land Developers: Joint Production, Local Externalities, and Mixed Housing Author-Name: Hideo Konishi Author-X-Name-First: Hideo Author-X-Name-Last: Konishi Author-Person: pko35 Author-Email: konishih@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Series: Boston College Working Papers in Economics Number: 777 Abstract: Housing developments (condos and suburban developments) are not necessarily homogeneous. Developers provide different types of units with various sizes and other characteristics catering to different types of customers. In this paper, we allow local consumption externalities within each development: some consumers would be happy to pay high prices for the most prestigious units in the development, while some are happy to have modest units as long as the prices are low. We consider land developers who seek the optimal mix of units in developments to maximize their profits. We show that there exists an equilibrium, and that every equilibrium is Pareto efficient as long as consumers and developers are optimistic in a certain sense. We provide examples in which mixed developments are more profitable to the developers. We relate this work to widely used hedonic pricing model by Rosen (1974), and to an equilibrium concept under asymmetric information by Rothschild and Stiglitz (1976). Classification-JEL: H7, R1 Keywords: land developers, mixed development, joint production, consumption externalities, efficiency, equilibrium, entrepreneurship, hedonic pricing Note: previously circulated as "Entrepreneurial Land Developers: Local Externalities and Mixed Housing Developments" Publication-Status: published, Journal of Urban Economics, 75, 68-79, 2013 Creation-Date: 20110826 Revision-Date: 20130406 File-URL: http://fmwww.bc.edu/EC-P/wp777.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:777 Template-Type: ReDIF-Paper 1.0 Title: Voluntary Participation and the Provision of Public Goods in Large Finite Economies Author-Name: Hideo Konishi Author-X-Name-First: Hideo Author-X-Name-Last: Konishi Author-Person: pko35 Author-Email: konishih@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Ryusuke Shinohara Author-Workplace-Name: Shinshu University Author-X-Name-First: Ryusuke Author-X-Name-Last: Shinohara Series: Boston College Working Papers in Economics Number: 776 Abstract: We consider a public good provision game with voluntary participation. Agents participating in the game provide a public good and pay the fees according to a mechanism (allocation rule), while nonparticipants can free-ride on the participants. We examine how the equilibrium public good provision level is affected by enlarging the population of an economy. We introduce a condition for an allocation rule, the asymptotic uniform continuity in replication (AUCR), which requires that small changes in the population must yield only small changes in the public good provision and which is satisfied by many mechanisms. We show that under AUCR, the equilibrium level of the public good converges to zero as the economy is replicated in the sense of Milleron (1972). Classification-JEL: C72, H41 Keywords: public good provision, participation game, replicated economy Creation-Date: 20110826 Publication-Status: published, Journal of Public Economic Theory 16, 173-195, 2014 File-URL: http://fmwww.bc.edu/EC-P/wp776.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:776 Template-Type: ReDIF-Paper 1.0 Title: Optimal Fiscal Policy with Endogenous Product Variety Author-Name: Fabio Ghironi Author-X-Name-First: Fabio Author-X-Name-Last: Ghironi Author-Email: Fabio.Ghironi@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Person: pgh2 Author-Name: Sanjay K. Chugh Author-X-Name-First: Sanjay Author-X-Name-Last: Chugh Author-Person: pch1272 Author-WorkPlace-Name: University of Maryland Abstract: We study Ramsey-optimal fiscal policy in an economy in which product varieties are the result of forward-looking investment decisions by firms. There are two main results. First, depending on the particular form of variety aggregation in preferences, firms' dividend payments may be either subsidized or taxed in the long run. This policy balances monopoly incentives for product creation with consumers' welfare benefit of product variety. In the most empirically relevant form of variety aggregation, socially efficient outcomes entail a substantial tax on dividend income, removing the incentive for over-accumulation of capital, which takes the form of variety. Second, optimal policy induces dramatically smaller, but efficient, fluctuations of both capital and labor markets than in a calibrated exogenous policy. Decentralization requires zero intertemporal distortions and constant static distortions over the cycle. The results relate to Ramsey theory, which we show by developing welfare-relevant concepts of efficiency that take into account product creation. Keywords: zero intertemporal distortions, endogenous product variety, optimal taxation Classification-JEL: E20, E21, E22, E32, E62 Series: Boston College Working Papers in Economics Number: 775 Creation-Date: 20110811 File-URL: http://fmwww.bc.edu/EC-P/wp775.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:775 Template-Type: ReDIF-Paper 1.0 Title: Uncertainty Shocks in a Model of Effective Demand Author-Name: Susanto Basu Author-X-Name-First: Susanto Author-X-Name-Last: Basu Author-Person: pba274 Author-WorkPlace-Name: Boston College Author-WorkPlace-Name: NBER Author-Name: Brent Bundick Author-X-Name-First: Brent Author-X-Name-Last: Bundick Author-Email: brent.bundick@kc.frb.org Author-WorkPlace-Name: Federal Reserve Bank of Kansas City Abstract: Can increased uncertainty about the future cause a contraction in output and its components? An identified uncertainty shock in the data causes significant declines in output, consumption, investment, and hours worked. Standard general-equilibrium models with flexible prices cannot reproduce this comovement. However, uncertainty shocks can easily generate comovement with countercyclical markups through sticky prices. Monetary policy plays a key role in offsetting the negative impact of uncertainty shocks during normal times. Higher uncertainty has even more negative effects if monetary policy can no longer perform its usual stabilizing function because of the zero lower bound. We calibrate our uncertainty shock process using fluctuations in implied stock market volatility and show that the model with nominal price rigidity is consistent with empirical evidence from a structural vector autoregression. We argue that increased uncertainty about the future likely played a role in worsening the Great Recession. Series: Boston College Working Papers in Economics Number: 774 Creation-Date: 20110908 Revision-Date: 20151101 Keywords: Uncertainty Shocks, Monetary Policy, Sticky-Price Models, Zero Lower Bound on Nominal Interest Rates Classification-JEL: E32, E52 File-URL: http://fmwww.bc.edu/EC-P/wp774.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:774 Template-Type: ReDIF-Paper 1.0 Title: On the Likelihood of Cyclic Comparisons Author-Name: Ariel Rubinstein Author-X-Name-First: Ariel Author-X-Name-Last: Rubinstein Author-Workplace-Name: University of Tel Aviv Author-Name: Uzi Segal Author-X-Name-First: Uzi Author-X-Name-Last: Segal Author-Person: pse40 Author-Email: uzi.segal@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Series: Boston College Working Papers in Economics Number: 773 Abstract: We investigate the procedure of "random sampling" where the alternatives are random variables. When comparing any two alternatives, the decision maker samples each of the alternatives once and ranks them according to the comparison between the two realizations. Our main result is that when applied to three alternatives, the procedure yields a cycle with a probability bounded above by 8/27. Bounds are also obtained for other related procedures. Creation-Date: 20110427 Revision-Date: 20120212 Classification-JEL: C91, D11 Keywords: Transitivity, preference formation, the paradox of nontransitive dice File-URL: http://fmwww.bc.edu/EC-P/wp773.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:773 Template-Type: ReDIF-Paper 1.0 Title: The Macroeconomic Effects on Interest on Reserves Author-Name: Peter N. Ireland Author-X-Name-First: Peter Author-X-Name-Last: Ireland Author-Person: pir1 Author-Email: peter.ireland@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: This paper uses a New Keynesian model with banks and deposits, calibrated to match the US economy, to study the macroeconomic effects of policies that pay interest on reserves. While their effects on output and inflation are small, these policies require important adjustments in the way that the monetary authority manages the supply of reserves, as liquidity effects vanish and households' portfolio shifts increase banks' demand for reserves when short-term interest rates rise. Money and monetary policy remain linked in the long run, however, since policy actions that change the price level must change the supply of reserves proportionately. Classification-JEL: E31, E32, E51, E52, E58 Keywords: banking, reserves, interest, central banking Series: Boston College Working Papers in Economics Number: 772 Creation-Date: 20110201 File-URL: http://fmwww.bc.edu/EC-P/wp772.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:772 Template-Type: ReDIF-Paper 1.0 Title: Road Pricing with Optimal Mass Transit Author-Name: Marvin Kraus Author-X-Name-First: Marvin Author-X-Name-Last: Kraus Author-Email: kraus@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Person: pkr27 Series: Boston College Working Papers in Economics Number: 771 Abstract: This paper asks the question, "How should the level of mass transit service be adjusted when road pricing is introduced for a substitute auto mode?" The reference point for the introduction of road pricing is second-best optimization in transit. Because this involves below- marginal-cost pricing in transit, it is efficient for road pricing to be accompanied by an increase in the transit fare and a reduction in service. This runs counter to the usual view of using the toll revenue generated by road pricing to provide a higher level of transit service. Keywords: congestion pricing; road pricing Classification-JEL: R4 Creation-Date: 20110131 Revision-Date: 20120415 File-URL: http://fmwww.bc.edu/EC-P/wp771.pdf File-Format: application/pdf Handle: RePEc:boc:bocoec:771 Template-Type: ReDIF-Paper 1.0 Title: Ranking Ranking Rules Author-Name: Barak Medina Author-X-Name-First: Barak Author-X-Name-Last: Medina Author-Workplace-Name: Hebrew University Author-Name: Shlomo Naeh Author-X-Name-First: Shlomo Author-X-Name-Last: Naeh Author-Workplace-Name: Hebrew University Author-Name: Uzi Segal Author-X-Name-First: Uzi Author-X-Name-Last: Segal Author-Person: pse40 Author-Email: uzi.segal@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Series: Boston College Working Papers in Economics Number: 770 Abstract: Transitivity is a fundamental requirement for consistency. Legal systems, especially when composed over time and by different agencies, may encounter non-transitive cycles. This paper discusses a new solution to such cycles, namely setting the hierarchy of the relevant rules or preferences. The hierarchy determines the sequence of applying the rules or preferences, and thus enables avoiding non-transitive cycles. The paper provides a formal generalization of this solution, and demonstrates its possible implementation to anti-discrimination laws. It is also shown that this solution can be traced to the Rabbinic literature, starting with the Mishnah and the Talmud (1st–5th c CE). Creation-Date: 20110103 Revision-Date: 20120227 Classification-JEL: D71, K31 Keywords: transitivity, cycles, Talmud File-URL: http://fmwww.bc.edu/EC-P/wp770.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:770 Template-Type: ReDIF-Paper 1.0 Title: No Externalities: A Characterization of Efficiency and Incentive Compatibility with Public Goods Author-Name: Joseph M. Ostroy Author-X-Name-First: Joseph Author-X-Name-Last: Ostroy Author-Workplace-Name: UCLA Author-Name: Uzi Segal Author-X-Name-First: Uzi Author-X-Name-Last: Segal Author-Person: pse40 Author-Email: uzi.segal@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Series: Boston College Working Papers in Economics Number: 769 Abstract: We show that efficient anonymous incentive compatible (dominant strategy) mechanisms for public goods eliminate externalities, i.e., each individual is unable to change the welfare of anyone else. The characterization is used to derive existence and non-existence results for models with a finite number of individuals and to explain existence results in the continuum. A similar characterization and conclusions are demonstrated for private goods in [7]. However, unlike private goods, elimination of externalities with public goods implies that individuals cannot change the outcome. Hence, such mechanisms provide only weak incentives for truth-telling. Creation-Date: 20100922 Classification-JEL: C72, D62, D70, H41 Keywords: Public goods; private goods; no externalities; incentive compatibility; duality File-URL: http://fmwww.bc.edu/EC-P/wp769.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:769 Template-Type: ReDIF-Paper 1.0 Title: The Case for Discrimination Author-Name: Alon Harel Author-X-Name-First: Alon Author-X-Name-Last: Harel Author-Workplace-Name: Hebrew University Author-Name: Uzi Segal Author-X-Name-First: Uzi Author-X-Name-Last: Segal Author-Person: pse40 Author-Email: uzi.segal@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Series: Boston College Working Papers in Economics Number: 768 Abstract: This paper defends the use of asymmetric norms which grant gre- ater privileges to minorities than to majorities. The norms we discuss include norms facilitating the establishment or prohibition of minority- only or majority-only institutions, neighborhoods, or associations. While traditionally the primary arguments favoring minorities’ privileges have been based on considerations of fairness or justice, we show that there are simple environments where asymmetric norms would maximize aggregate sum of individual utilities. A utilitarian may therefore support the establishment of black colleges or Hassidic only neighborhoods while at the same time oppose exclusion of blacks or Jews from white or Christian neighborhoods. Creation-Date: 20110103 Classification-JEL: D63, J15 Keywords: Utilitarianism, housing discrimination, minority rights File-URL: http://fmwww.bc.edu/EC-P/wp768.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:768 Template-Type: ReDIF-Paper 1.0 Title: Health and Retirement Effects in a Collective Consumption Model of Older Households Author-Name: Aline Bütikofer Author-X-Name-First: Aline Author-X-Name-Last: Bütikofer Author-Workplace-Name: University of Bern Author-Name: Arthur Lewbel Author-X-Name-First: Arthur Author-X-Name-Last: Lewbel Author-Person: ple43 Author-Email: lewbel@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Shannon Seitz Author-X-Name-First: Shannon Author-X-Name-Last: Seitz Author-Person: pse14 Author-Workplace-Name: Boston College Abstract: Using data on elderly individuals and couples, we estimate a collective model of household consumption of a variety of goods, showing how resources are shared between husband and wife, and how this allocation is affected by retirement and health status. We identify the extent to which shared consumption of some goods by elderly married couples reduces their costs of living relative to living alone. We also identify the fraction of household resources consumed by wives versus husbands, taking this jointness of some consumption into account. The results are relevant for household bargaining models and for a variety of welfare calculations. Keywords: Collective household models, Bargaining models, Retirement, Aging, Health, Equivalence scales, Indifference scales, Cost of Living, Consumption, Welfare Classification-JEL: D13, D12, I1, D6, C30 Series: Boston College Working Papers in Economics Number: 767 Creation-Date: 20101215 Revision-Date: 20110115 File-URL: http://fmwww.bc.edu/EC-P/wp767.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:767 Template-Type: ReDIF-Paper 1.0 Author-Name: Georg H. Strasser Author-X-Name-First: Georg Author-X-Name-Last: Strasser Author-Person: pst327 Author-Email: Georg.Strasser@bc.edu Author-Workplace-Name: Department of Economics, Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Title: The Efficiency of the Global Markets for Final Goods and Productive Capabilities Abstract: Slow mean reversion of real exchange rates is commonly considered a result of border frictions that remain despite integration of financial and goods markets. This paper shows that even if border frictions decline, a contemporaneous decline in output shock variance can in fact slow down mean reversion. It proposes a new method of estimating border cost from time-series data only, without relying on within-country variation. Applying this method to the real exchange rate of final goods and a novel measure of the real exchange rate for productive capabilities, such as technology and know-how, gives very differential border cost estimates. During the years 1974–2008, a relocation reduces productive capability by 22% for the average country pair, whereas final goods by only 15%. The real exchange rate for final goods takes more than two years to revert to purchasing power parity, more than twice as long as productive capabilities. Creation-Date: 20101214 Revision-Date: 20120131 File-URL: http://fmwww.bc.edu/EC-P/wp766.pdf File-Format: application/pdf File-Function: main text Classification-JEL: F21, F31, C51 Series: Boston College Working Papers in Economics Number: 766 Keywords: Border Effect, Real Exchange Rate, PPP, Technology Spillover, Indirect Inference Handle: RePEc:boc:bocoec:766 Template-Type: ReDIF-Paper 1.0 Title: The Domestic and International Effects of Interstate U.S. Banking Author-Name: Fabio Ghironi Author-X-Name-First: Fabio Author-X-Name-Last: Ghironi Author-Email: Fabio.Ghironi@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Person: pgh2 Author-Name: Viktors Stebunovs Author-X-Name-First: Viktors Author-X-Name-Last: Stebunovs Author-WorkPlace-Name: Board of Governors of the Federal Reserve System Abstract: This paper studies the domestic and international effects of the transition to an interstate banking system implemented by the U.S. since the late 1970s in a dynamic, stochastic, general equilibrium model with endogenous producer entry. Interstate banking reduces the degree of local monopoly power of financial intermediaries. We show that the an economy that implements this form of deregulation experiences increased producer entry, real exchange rate appreciation, and a current account deficit. The rest of the world experiences a long-run increase in GDP and consumption. Less monopoly power in financial intermediation results in less volatile business creation, reduced markup countercyclicality, and weaker substitution effects in labor supply in response to productivity shocks. Bank market integration thus contributes to a moderation of firm-level and aggregate output volatility. In turn, trade and financial ties between the two countries in our model allow also the foreign economy to enjoy lower GDP volatility in most scenarios we consider. The results of the model are consistent with features of the U.S. and international business cycle after the U.S. began its transition to interstate banking. Keywords: Business cycle volatility; Current account; Deregulation; Interstate banking; Producer entry; Real exchange rate Classification-JEL: E32; F32; F41; G21 Series: Boston College Working Papers in Economics Number: 765 Creation-Date: 20101217 File-URL: http://fmwww.bc.edu/EC-P/wp765.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:765 Template-Type: ReDIF-Paper 1.0 Title: Using Stata for Applied Research: Reviewing its Capabilities Author-Name: Christopher F Baum Author-X-Name-First: Christopher Author-X-Name-Last: Baum Author-Person: pba1 Author-Email: baum@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Workplace-Name: DIW Berlin Author-Name: Mark E. Schaffer Author-X-Name-First: Mark Author-X-Name-Last: Schaffer Author-Email: M.E.Schaffer@hw.ac.uk Author-Workplace-Name: Heriot-Watt University Author-Workplace-Name: CEPR Author-Workplace-Name: IZA Author-Person: psc51 Author-Name: Steven Stillman Author-X-Name-First: Steven Author-X-Name-Last: Stillman Author-Email: stillman@motu.org.nz Author-Workplace-Name: Motu Economic and Public Policy Research Author-Workplace-Name: University of Waikato Author-Workplace-Name: IZA Author-Person: pst124 Abstract: We review the Stata statistical package and evaluate its suitability for applied research. Keywords: Stata, empirical research, applied econometrics Series: Boston College Working Papers in Economics Number: 764 Classification-JEL: C81, C82, C83, C87, C88 Publication-Status: published, Journal of Economic Surveys, 2011, 25:2, 380-394 Creation-Date: 20101201 File-URL: http://fmwww.bc.edu/EC-P/wp764.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:764 Template-Type: ReDIF-Paper 1.0 Title: Theology, Economics, and Economic Development Author-Name: Peter N. Ireland Author-X-Name-First: Peter Author-X-Name-Last: Ireland Author-Person: pir1 Author-Email: peter.ireland@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: Although theologians and economists communicate their ideas to different professional audiences in different ways, we agree on many basic points. We agree, for instance, that all too often, a large gap appears between "what is" and "what should be." We agree, more specifically, that unregulated markets lead to undesirable and perhaps even disastrous environmental degradation. And we view with great suspicion government policies that redistribute wealth perversely, away from the needy and towards the affluent. But while economists share theologians' concerns about the problems that economic development brings, we can also point to benefits that come with rising income levels. Classification-JEL: A12, A13, O10, Q56 Keywords: theology, economics, economic development Series: Boston College Working Papers in Economics Number: 763 Creation-Date: 20101115 File-URL: http://fmwww.bc.edu/EC-P/wp763.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:763 Template-Type: ReDIF-Paper 1.0 Title: A Semiparametric Panel Model for unbalanced data with Application to Climate Change in the United Kingdom Author-Name: Alev Atak Author-WorkPlace-Name: Queen Mary, University of London Author-Email: a.atak@qmul.ac.uk Author-Name: Oliver Linton Author-WorkPlace-Name: London School of Economics Author-Email: o.linton@lse.ac.uk Author-Name: Zhijie Xiao Author-Email: xiaoz@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Person: pxi26 Abstract: This paper is concerned with developing a semiparametric panel model to explain the trend in UK temperatures and other weather outcomes over the last century. We work with the monthly averaged maximum and minimum temperatures observed at the twenty six Meteorological Office stations. The data is an unbalanced panel. We allow the trend to evolve in a nonparametric way so that we obtain a fuller picture of the evolution of common temperature in the medium timescale. Profile likelihood estimators (PLE) are proposed and their statistical properties are studied. The proposed PLE has improved asymptotic property comparing the the sequential two-step estimators. Finally, forecasting based on the proposed model is studied. Keywords: Global warming; Kernel estimation; Semiparametric; Trend analysis Classification-JEL: C13; C14; C21; D24 Series: Boston College Working Papers in Economics Number: 762 Creation-Date: 20100901 File-URL: http://fmwww.bc.edu/EC-P/wp762.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:762 Template-Type: ReDIF-Paper 1.0 Title: Semiparametric Quantile Regression Estimation in Dynamic Models with Partially Varying Coefficients Author-Name: Zongwu Cai Author-WorkPlace-Name: Department of Mathematics & Statistics, University of North Carolina at Charlotte Author-WorkPlace-Name: Fujian Key Laboratory of Statistical Sciences, Xiamen University Author-Name: Zhijie Xiao Author-Email: xiaoz@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Person: pxi26 Abstract: We study quantile regression estimation for dynamic models with partially varying coefficients so that the values of some coefficients may be functions of informative covariates. Estimation of both parametric and nonparametric functional coefficients are proposed. In particular, we propose a three stage semiparametric procedure. Both consistency and asymptotic normality of the proposed estimators are derived. We demonstrate that the parametric estimators are root-n consistent and the estimation of the functional coefficients is oracle. In addition, efficiency of parameter estimation is discussed and a simple efficient estimator is proposed. A simple and easily implemented test for the hypothesis of varying-coefficient is proposed. A Monte Carlo experiment is conducted to evaluate the performance of the proposed estimators. Keywords: Efficiency; nonlinear time series; partially linear; partially varying coefficients; quantile regression; semiparametric Classification-JEL: C14, C22 Series: Boston College Working Papers in Economics Number: 761 Creation-Date: 20101122 File-URL: http://fmwww.bc.edu/EC-P/wp761.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:761 Template-Type: ReDIF-Paper 1.0 Title: The Roots of the Financial Collapse: Going Way, Way Back Author-Name: Harold Petersen Author-X-Name-First: Harold Author-X-Name-Last: Petersen Author-Email: petersen@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: The paper is based on a talk given in April 2010. It traces the roots of the recent financial crisis from development of the limited liability corporation, to separation of ownership from control, tax incentives for debt financing, investment bankers moving to the corporate form, government backstopping the lenders, and the failure of the quants. Finally, it considers the Minsky hypothesis, under which financial markets are inherently unstable. Keywords: financial crises, limited liability, leverage, incentives, investment banking, corporate taxation, quants, Minsky hypothesis. Classification-JEL: G01, G18 Series: Boston College Working Papers in Economics Number: 760 Creation-Date: 20100925 File-URL: http://fmwww.bc.edu/EC-P/wp760.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:760 Template-Type: ReDIF-Paper 1.0 Title: Identifying the Effect of Changing the Policy Threshold in Regression Discontinuity Models Author-Name: Yingying Dong Author-X-Name-First: Yingying Author-X-Name-Last: Dong Author-Workplace-Name: California State University, Irvine Author-Person: pdo242 Author-Name: Arthur Lewbel Author-X-Name-First:Arthur Author-X-Name-Last: Lewbel Author-Person: ple43 Author-Email: lewbel@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: Regression discontinuity models, where the probability of treatment jumps discretely when a running variable crosses a threshold, are commonly used to nonparametrically identify and estimate a local average treatment effect. We show that the derivative of this treatment effect with respect to the running variable is nonparametrically identified and easily estimated. Then, given a local policy invariance assumption, we show that this derivative equals the change in the treatment effect that would result from a marginal change in the threshold, which we call the marginal threshold treatment effect (MTTE). We apply this result to Manacorda (2012), who estimates a treatment effect of grade retention on school outcomes. Our MTTE identifies how this treatment effect would change if the threshold for retention was raised or lowered, even though no such change in threshold is actually observed. Keywords: regression discontinuity, sharp design, fuzzy design, treatment effects, program evaluation, threshold, running variable, forcing variable, marginal effects. Classification-JEL: C21, C25 Note: Previously circulated as "Regression Discontinuity Marginal Threshold Treatment Effects" Series: Boston College Working Papers in Economics Number: 759 Creation-Date: 20100801 Revision-Date: 20121215 File-URL: http://fmwww.bc.edu/EC-P/wp759.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:759 Template-Type: ReDIF-Paper 1.0 Title: Children's Resources in Collective Households: Identification, Estimation and an Application to Child Poverty in Malawi Author-Name: Geoffrey Dunbar Author-X-Name-First: Geoffrey Author-X-Name-Last: Dunbar Author-Workplace-Name: Simon Fraser University Author-Name: Arthur Lewbel Author-X-Name-First: Arthur Author-X-Name-Last: Lewbel Author-Person: ple43 Author-Email: lewbel@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Krishna Pendakur Author-X-Name-First: Krishna Author-X-Name-Last: Pendakur Author-Workplace-Name: Simon Fraser University Abstract: The share of household resources devoted to children is hard to identify, because consumption is measured at the household level, and goods can be shared. Using semiparametric restrictions on individual preferences within a collective model, we identify how total household resources are divided up among household members, by observing how each family member's expenditures on a single private good like clothing varies with income and family size. Using data from Malawi we show how resources devoted to wives and children vary by family size and structure, and we find that standard poverty indices understate the incidence of child poverty. Keywords: Collective Model, Cost of Children, Bargaining Power, Identification, Sharing rule, Demand Systems, Engel Curves Classification-JEL: D13, D11, D12, C31, I32 Series: Boston College Working Papers in Economics Number: 758 Creation-Date: 20100601 Revision-Date: 20120131 Publication-Status: published, American Economic Review, 2013, 103, 438-471 File-URL: http://fmwww.bc.edu/EC-P/wp758.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:758 Template-Type: ReDIF-Paper 1.0 Title: Nonparametric Euler Equation Identification and Estimation Author-Name: Juan Carlos Escanciano Author-X-Name-First: Juan Author-X-Name-Last: Escanciano Author-Person: pes22 Author-WorkPlace-Name: Universidad Carlos III de Madrid Author-Name: Stefan Hoderlein Author-X-Name-First: Stefan Author-X-Name-Last: Hoderlein Author-WorkPlace-Name: Boston College Author-Person: pho618 Author-Name: Arthur Lewbel Author-X-Name-First: Arthur Author-X-Name-Last: Lewbel Author-Person: ple43 Author-Email: lewbel@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Oliver Linton Author-X-Name-First: Oliver Author-X-Name-Last: Linton Author-Workplace-Name: London School of Economics Author-Email: o.linton@lse.ac.uk Author-Name: Sorawoot Srisuma Author-X-Name-First: Sorawoot Author-X-Name-Last: Srisuma Author-Workplace-Name: London School of Economics Author-Email: s.t.srisuma@lse.ac.uk Abstract: We consider nonparametric identiÖcation and estimation of pricing kernels, or equivalently of marginal utility functions up to scale, in consumption based asset pricing Euler equations. Ours is the Örst paper to prove nonparametric identification of Euler equations under low level conditions (without imposing functional restrictions or just assuming completeness). We also propose a novel nonparametric estimator based on our identification analysis, which combines standard kernel estimation with the computation of a matrix eigenvector problem. Our estimator avoids the ill-posed inverse issues associated with nonparametric instrumental variables estimators. We derive limiting distributions for our estimator and for relevant associated functionals. A Monte Carlo shows a satisfactory finite sample performance for our estimators. Classification-JEL: C14, D91, E21, G12 Keywords: Euler equations, marginal utility, pricing kernel, Fredholm equations, integral equations, nonparametric identiÖcation, asset pricing Series: Boston College Working Papers in Economics Number: 757 Creation-Date: 20100601 Revision-Date: 20200315 File-URL: http://fmwww.bc.edu/EC-P/wp757.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:757 Template-Type: ReDIF-Paper 1.0 Title: Uniform Convergence of Weighted Sums of Non- and Semi-parametric Residuals for Estimation and Testing Author-Name: Juan Carlos Escanciano Author-X-Name-First: Juan Author-X-Name-Last: Escanciano Author-Workplace-Name: Indiana University Author-Name: David Jacho-Chavez Author-X-Name-First: David Author-X-Name-Last: Chavez Author-Workplace-Name: Indiana University Author-Name: Arthur Lewbel Author-X-Name-First:Arthur Author-X-Name-Last: Lewbel Author-Person: ple43 Author-Email: lewbel@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: A new uniform expansion is introduced for sums of weighted kernel-based regression residuals from nonparametric or semiparametric models. This result is useful for deriving asymptotic properties of semiparametric estimators and test statistics with data-dependent bandwidth, random trimming, and estimated weights. An extension allows for generated regressors, without requiring the calculation of functional derivatives. Example applications are provided for a binary choice model with selection, including a new semiparametric maximum likelihood estimator, and a new directional test for correct specification of the average structural function. An extended Appendix contains general results on uniform rates for kernel estimators, additional applications, and primitive sufficient conditions for high level assumptions. Keywords: Double index models; Two step estimators; Semiparametric regression; Control function estimators; Sample selection models; Empirical process theory; Limited dependent variables; Oracle estimators; Migration Classification-JEL: C13; C14; C21; D24 Note: Previously circulated as "Uniform Convergence for Semiparametric Two Step Estimators and Tests" Series: Boston College Working Papers in Economics Number: 756 Creation-Date: 20100501 Revision-Date: 20120131 File-URL: http://fmwww.bc.edu/EC-P/wp756.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:756 Template-Type: ReDIF-Paper 1.0 Title: Nonparametric Identification of Accelerated Failure Time Competing Risks Models Author-Name: Sokbae Lee Author-X-Name-First: Sokbae Author-X-Name-Last: Lee Author-Workplace-Name: University College London Author-Name: Arthur Lewbel Author-X-Name-First:Arthur Author-X-Name-Last: Lewbel Author-Person: ple43 Author-Email: lewbel@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: We provide new conditions for identification of accelerated failure time competing risks models. These include Roy models and some auction models. In our set up, unknown regression functions and the joint survivor function of latent disturbance terms are all nonparametric. We show that this model is identified given covariates that are independent of latent errors, provided that a certain rank condition is satisfied. We present a simple example in which our rank condition for identification is verified. Our identification strategy does not depend on identification at infinity or near zero, and it does not require exclusion assumptions. Given our identification, we show estimation can be accomplished using sieves. Keywords: accelerated failure time models; competing risks; identifiability. Classification-JEL: Series: Boston College Working Papers in Economics Number: 755 Creation-Date: 20100401 Revision-Date: 20110630 File-URL: http://fmwww.bc.edu/EC-P/wp755.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:755 Template-Type: ReDIF-Paper 1.0 Title: How important is variability in consumer credit limits? Author-Name: Scott Fulford Author-X-Name-First: Scott Author-X-Name-Last: Fulford Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Person: pfu103 Abstract: Credit limit variability is a crucial aspect of the consumption, savings, and debt decisions of households in the United States. Using a large panel this paper first demonstrates that individuals gain and lose access to credit frequently and often have their credit limits reduced unexpectedly. Credit limit volatility is larger than most estimates of income volatility and varies over the business cycle. While typical models of intertemporal consumption fix the credit limit, I introduce a model with variable credit limits. Variable credit limits create a reason for households to hold both high interest debts and low interest savings at the same time since the savings act as insurance. Simulating the model using the estimates of credit limit volatility, I show that it explains all of the credit card puzzle: why around a third of households in the United States hold both debt and liquid savings at the same time. The approach also offers an important new channel through which financial system uncertainty can affect household decisions. Keywords: credit, debt, liquidity, credit card puzzle, financial uncertainty Classification-JEL: E21 Series: Boston College Working Papers in Economics Number: 754 Creation-Date: 20100901 Revision-Date: 20140501 Publication-Status: forthcoming, Journal of Monetary Economics Note: Previously circulated as "What credit card puzzle? Precaution, variable debt limits, and what we can learn from the small debts of poor people" File-URL: http://fmwww.bc.edu/EC-P/wp754.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:754 Template-Type: ReDIF-Paper 1.0 Title: How important are banks for development? National banks in the United States 1870–1900 Author-Name: Scott Fulford Author-X-Name-First: Scott Author-X-Name-Last: Fulford Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Person: pfu103 Abstract: What financial services matter for growth? This paper examines the effects national banks had on growth in the United States from 1870-1900. These banks were commercial not investment banks: they made short term loans and could not take land as collateral. I use the discontinuity in entry caused by a large minimum capital requirement to identify the effects of banking. Counties getting a bank increased production per person substantially and tilted production towards agriculture over manufacturing by expanding land under cultivation, not improving yields. The effects are highly persistent and show that the commercial activities of banks matter for growth. Keywords: National banks, commercial banking, development, growth Classification-JEL: O16, D91 Series: Boston College Working Papers in Economics Number: 753 Creation-Date: 20100901 Revision-Date: 20141215 Publication-Status: forthcoming, Review of Economics and Statistics Note: Previously circulated as "If financial development matters, then how? National banks in the United States 1870-1900" File-URL: http://fmwww.bc.edu/EC-P/wp753.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:753 Template-Type: ReDIF-Paper 1.0 Title: Demand Analysis as an Ill-Posed Inverse Problem with Semiparametric Specification Author-Name: Stefan Hoderlein Author-X-Name-First: Stefan Author-X-Name-Last: Hoderlein Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Person: pho119 Author-Name: Hajo Holzmann Author-X-Name-First: Hajo Author-X-Name-Last: Holzmann Author-Workplace-Name: Karlsruhe University Author-Email: holzmann@stoch.uni-karlsruhe.de Abstract: In this paper we are concerned with analyzing the behavior of a semiparametric estimator which corrects for endogeneity in a nonparametric regression by assuming mean independence of residuals from instruments only. Because it is common in many applications, we focus on the case where endogenous regressors and additional instruments are jointly normal, conditional on exogenous regressors. This leads to a severely ill-posed inverse problem. In this setup, we show first how to test for conditional normality. More importantly, we then establish how to exploit this knowledge when constructing an estimator, and we derive results characterizing the large sample behavior of such an estimator. In addition, in a Monte Carlo experiment we analyze the finite sample behavior of the proposed estimator. Our application comes from consumer demand. We obtain new and interesting findings that highlight both the advantages, and the difficulties of an approach which leads to ill-posed inverse problems. Finally, we discuss the somewhat problematic relationship between nonparametric instrumental variable models, and the recently emphasized issue of unobserved heterogeneity in structural models. Keywords: Instrumental variables; Inverse problem; Nonparametric regression, Consumer Demand, Convergence rates Classification-JEL: Series: Boston College Working Papers in Economics Number: 752 Creation-Date: 20080806 File-URL: http://fmwww.bc.edu/EC-P/wp752.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:752 Template-Type: ReDIF-Paper 1.0 Title: Developments in Nonparametric Demand Analysis: Heterogeneity and Nonparametrics Author-Name: Stefan Hoderlein Author-X-Name-First: Stefan Author-X-Name-Last: Hoderlein Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Person: pho119 Abstract: This paper discusses new development in nonparametric econometric approaches related to empirical modeling of demand decisons. It shows how diverse recent approaches are, and what new modeling options arise in practice. We review work on nonparametric identification using nonseparable functions, semi-and nonparametric estimation approaches involving inverse problems, and nonparametric testing approaches. We focus on classical consumer demand systems with continuous quantities, and do not consider approaches that involve discrete consumption decisions as are common in empirical industrial organization. Our intention is to give a subjective account on the usefulness of these various methods for applications in the field. Keywords: Nonparametric, Integrability, Testing Rationality, Nonseparable Models, Demand, Nonparametric IV Classification-JEL: Series: Boston College Working Papers in Economics Number: 751 Creation-Date: 20081230 File-URL: http://fmwww.bc.edu/EC-P/wp751.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:751 Template-Type: ReDIF-Paper 1.0 Title: Structural Measurement Errors in Nonseparable Models Author-Name: Stefan Hoderlein Author-X-Name-First: Stefan Author-X-Name-Last: Hoderlein Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Person: pho119 Author-Name: Joachim Winter Author-X-Name-First: Joachim Author-X-Name-Last: Winter Author-Workplace-Name: University of Munich Author-Email: winter@lmu.de Abstract: This paper considers measurement error from a new perspective. In surveys, response errors are often caused by the fact that respondents recall past events and quantities imperfectly. We explore the consequences of recall errors for such key econometric issues as the identification of marginal effects or economic restrictions in structural models. Our identification approach is entirely nonparametric, using Matzkin-type nonseparable models that nest a large class of potential structural models. We establish that measurement errors due to poor recall are generally likely to exhibit nonstandard behavior, in particular be nonclassical and differential, and we provide means to deal with this situation. Moreover, our findings suggest that conventional wisdom about measurement errors may be misleading in many economic applications. For instance, under certain conditions left-hand side recall errors will be problematic even in the linear model, and quantiles will be less robust than means. Finally, we apply the main concepts put forward in this paper to real world data, and find evidence that underscores the importance of focusing on individual response behavior. Keywords: Measurement Error, Nonparametric, Survey Design, Nonseparable Model, Identification, Zero Homogeneity, Demand Classification-JEL: Series: Boston College Working Papers in Economics Number: 750 Creation-Date: 20090129 File-URL: http://fmwww.bc.edu/EC-P/wp750.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:750 Template-Type: ReDIF-Paper 1.0 Title: Testing Homogeneity in Demand Systems Nonparametrically: Theory and Evidence Author-Name: Berthold R. Haag Author-X-Name-First: Berthold Author-X-Name-Last: Haag Author-Workplace-Name: HypoVereinsbank Author-Name: Stefan Hoderlein Author-X-Name-First: Stefan Author-X-Name-Last: Hoderlein Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Person: pho119 Author-Name: Sonya Mihaleva Author-X-Name-First: Sonya Author-X-Name-Last: Mihaleva Author-Workplace-Name: Brown University Abstract: Homogeneity of degree zero has often been rejected in empirical studies that employ parametric models. This paper proposes a test for homogeneity that does not depend on the correct specification of the functional form of the empirical model. The test statistic we propose is based on kernel regression and extends nonparametric specification tests to systems of equations with weakly dependent data. We discuss a number of practically important issues and further extensions. In particular, we focus on a novel bootstrap version of the test statistic. Moreover, we show that the same test also allows to assess the validity of functional form assumptions. When we apply the test to British household data, we find homogeneity generally well accepted. In contrast, we reject homogeneity with a standard almost ideal parametric demand system. Using our test for functional form we obtain however that it it precisely this functional form assumption which is rejected. Our findings indicate that the rejections of homogeneity obtained thus far are due to misspecification of the functional form and not due to incorrectness of the homogeneity assumption. Keywords: Homogeneity, Nonparametric, Bootstrap, Specification Test, System of Equations Classification-JEL: Series: Boston College Working Papers in Economics Number: 749 Creation-Date: 20090924 File-URL: http://fmwww.bc.edu/EC-P/wp749.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:749 Template-Type: ReDIF-Paper 1.0 Title: How Many Consumers are Rational? Author-Name: Stefan Hoderlein Author-X-Name-First: Stefan Author-X-Name-Last: Hoderlein Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Person: pho119 Abstract: Rationality places strong restrictions on individual consumer behavior. This paper is concerned with assessing the validity of the integrability constraints imposed by standard utility maximization, arising in classical consumer demand analysis. More specifically, we characterize the testable implications of negative semidefiniteness and symmetry of the Slutsky matrix across a heterogeneous population without assuming anything on the functional form of individual preferences. In the same spirit, homogeneity of degree zero is being considered. Our approach employs nonseparable models and is centered around a conditional independence assumption, which is sufficiently general to allow for endogenous regressors. It is the only substantial assumption a researcher has to specify in this model, and has to be evaluated with particular care. Finally, we apply all concepts to British household data: We show that rationality is an acceptable description for large parts of the population, regardless of whether we test on single or composite households. Keywords: Nonparametric, Integrability, Testing Rationality, Nonseparable Models, Demand, Nonparametric IV Classification-JEL: C12, C14, D12, D01 Series: Boston College Working Papers in Economics Number: 748 Creation-Date: 20091020 File-URL: http://fmwww.bc.edu/EC-P/wp748.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:748 Template-Type: ReDIF-Paper 1.0 Title: Endogenous Semiparametric Binary Choice Models with Heteroscedasticity Author-Name: Stefan Hoderlein Author-X-Name-First: Stefan Author-X-Name-Last: Hoderlein Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Person: pho119 Abstract: In this paper we consider endogenous regressors in the binary choice model under a weak median exclusion restriction, but without further specification of the distribution of the unobserved random components. Our reduced form specification with heteroscedastic residuals covers various heterogeneous structural binary choice models. As a particularly relevant example of a structural model where no semiparametric estimator has of yet been analyzed, we consider the binary random utility model with endogenous regressors and heterogeneous parameters. We employ a control function IV assumption to establish identification of a slope parameter beta by the mean ratio of derivatives of two functions of the instruments. We propose an estimator based on direct sample counterparts, and discuss the large sample behavior of this estimator. In particular, we show root-n consistency and derive the asymptotic distribution. In the same framework, we propose tests for heteroscedasticity, overidentification and endogeneity. We analyze the small sample performance through a simulation study. An application of the model to discrete choice demand data concludes this paper. Keywords: Semiparametric, Binary Choice, Endogeneity, Average Derivative, Control Function, Random Coefficients Classification-JEL: Series: Boston College Working Papers in Economics Number: 747 Creation-Date: 20090604 Revision-Date: 20140929 File-URL: http://fmwww.bc.edu/EC-P/wp747.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:747 Template-Type: ReDIF-Paper 1.0 Title: Nonparametric Identification in Nonseparable Panel Data Models with Generalized Fixed Effects Author-Name: Stefan Hoderlein Author-X-Name-First: Stefan Author-X-Name-Last: Hoderlein Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Person: pho119 Author-Name: Halbert White Author-X-Name-First: Halbert Author-X-Name-Last: White Author-Person: pwh17 Abstract: This paper is concerned with extending the familiar notion of fixed effects to nonlinear setups with infinite dimensional unobservables like preferences. The main result is that a generalized version of differencing identifies local average structural derivatives (LASDs) in very general nonseparable models, while allowing for arbitrary dependence between the persistent unobservables and the regressors of interest even if there are only two time periods. These quantities specialize to well known objects like the slope coefficient in the semiparametric panel data binary choice model with fixed effects. We extend the basic framework to include dynamics in the regressors and time trends, and show how distributional effects as well as average effects are identified. In addition, we show how to handle endogeneity in the transitory component. Finally, we adapt our results to the semiparametric binary choice model with correlated coefficients, and establish that average structural marginal probabilities are identified. We conclude this paper by applying the last result to a real world data example. Using the PSID, we analyze the way in which the lending restrictions for mortgages eased between 2000 and 2004. Keywords: Nonseparable Models, Identification, Panel Data, Semiparametric, Binary Choice. Classification-JEL: Series: Boston College Working Papers in Economics Number: 746 Creation-Date: 20090711 File-URL: http://fmwww.bc.edu/EC-P/wp746.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:746 Template-Type: ReDIF-Paper 1.0 Title: Revealed Preferences in a Heterogeneous Population Author-Name: Stefan Hoderlein Author-X-Name-First: Stefan Author-X-Name-Last: Hoderlein Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Person: pho119 Author-Name: Jörg Stoye Author-X-Name-First: Jörg Author-X-Name-Last: Stoye Author-Email: j.stoye@nyu.edu Author-WorkPlace-Name: New York University Abstract: This paper explores the empirical content of the weak axiom of revealed preference (WARP) for repeated cross-sectional data or for panel data where individuals experience preference shocks. Specifically, in a heterogeneous population, think of the fraction of consumers violating WARP as the parameter of interest. This parameter depends on the joint distribution of choices over different budget sets. Repeated cross-sections do not reveal this distribution but only its marginals. Thus, the parameter is not point identified but can be bounded. We frame this as a copula problem and use copula techniques to analyze it. The bounds, as well as some nonparametric refinements of them, correspond to intuitive behavioral assumptions in the two goods case. With three or more goods, these intuitions break down, and plausible assumptions can have counterintuitive implications. Inference on the bounds is an application of partial identification through moment inequalities. We implement our analysis with the British Family Expenditure Survey (FES) data. Upper bounds are fre- quently positive but lower bounds not significantly so, hence FES data are consistent with WARP in a heterogeneous population. Keywords: Revealed Preference, Weak Axiom, Heterogeneity, Partial Identification, Moment Inequalities. Classification-JEL: Series: Boston College Working Papers in Economics Number: 745 Creation-Date: 20090813 File-URL: http://fmwww.bc.edu/EC-P/wp745.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:745 Template-Type: ReDIF-Paper 1.0 Title: Linking Granger Causality and the Pearl Causal Model with Settable Systems Author-Name: Halbert White Author-X-Name-First: Halbert Author-X-Name-Last: White Author-Person: pwh17 Author-Name: Karim Chalak Author-X-Name-First: Karim Author-X-Name-Last: Chalak Author-Email: chalak@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Person: pch561 Author-Name: Xun Lu Author-Workplace-Name: Hong Kong University of Science and Technology Abstract: The causal notions embodied in the concept of Granger causality have been argued to belong to a different category than those of Judea Pearl's Causal Model, and so far their relation has remained obscure. Here, we demonstrate that these concepts are in fact closely linked by showing how each relates to straightforward notions of direct causality embodied in settable systems, an extension and refinement of the Pearl Causal Model designed to accommodate optimization, equilibrium, and learning. We then provide straightforward practical methods to test for direct causality using tests for Granger causality. Keywords: Causal Models, Conditional Exogeneity, Conditional Independence, Granger Non-causality Classification-JEL: C12, C22, C32 Series: Boston College Working Papers in Economics Number: 744 Creation-Date: 20100801 File-URL: http://fmwww.bc.edu/EC-P/wp744.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:744 Template-Type: ReDIF-Paper 1.0 Title: Work and Retirement: How and When Older Americans Leave the Labor Force Author-Name: Joseph F. Quinn Author-Email: quinnj@bc.edu Author-Person: pqu7 Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: Series: Boston College Working Papers in Economics Number: 743 Creation-Date: 20100615 Keywords: Classification-JEL: File-URL: http://fmwww.bc.edu/EC-P/wp743.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:743 Template-Type: ReDIF-Paper 1.0 Title: Fair and Efficient Assignment via the Probabilistic Serial Mechanism Author-Name: Onur Kesten Author-X-Name-First: Onur Author-X-Name-Last: Kesten Author-WorkPlace-Name: Carnegie Mellon University Author-Name: Morimitsu Kurino Author-X-Name-First: Morimitsu Author-X-Name-Last: Kurino Author-WorkPlace-Name: Maastricht University Author-Name: M. Utku Ünver Author-X-Name-First: M. Author-X-Name-Last: Ünver Author-Person: pun2 Author-Workplace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: This paper studies the problem of assigning a set of indivisible objects to a set of agents when monetary transfers are not allowed. We offer two characterizations of the prominent lottery assignment mechanism called the probabilistic serial. We show that it is the only mechanism satisfying non-wastefulness and ordinal fairness. Our second result shows that a direct ordinal mechanism satisfies ordinal efficiency, envy-freeness, and upper invariance if and only if it is the probabilistic serial. Series: Boston College Working Papers in Economics Number: 742 Creation-Date: 20100727 Revision-Date: 20110530 Keywords: Random assignment; Probabilistic serial; Ordinal efficiency; Fairness Classification-JEL: C71; C78; D71; D78 Note: previously circulated as "The Probabilistic Serial Assignment Mechanism" File-URL: http://fmwww.bc.edu/EC-P/wp742.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:742 Template-Type: ReDIF-Paper 1.0 Title: The effects of financial development in the short and long run Author-Name: Scott Fulford Author-X-Name-First: Scott Author-X-Name-Last: Fulford Author-Person: pfu103 Author-Email: scott.fulford@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: Although many view financial access as a means of reducing poverty or increasing growth, empirical studies have produced contradictory results. One problem is that most studies cover only a short time frame and do not consider dynamic effects. I show that introducing credit creates a boom in consumption and reduces poverty initially, but eventually reduces mean con- sumption because credit substitutes for precautionary wealth. Using new consistent consump- tion data, my empirical findings show that increased access to bank branches in rural India increased consumption initially and reduced poverty, but consumption later fell and poverty rose. Keywords: financial access, precaution, development, India Classification-JEL: O16, D91 Series: Boston College Working Papers in Economics Number: 741 Creation-Date: 20100615 Revision-Date: 20110531 Publication-Status: published as "The effects of financial development in the short and long run: Theory and evidence from India", 2013. Journal of Development Economics 104, 56-72 File-URL: http://fmwww.bc.edu/EC-P/wp741.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:741 Template-Type: ReDIF-Paper 1.0 Title: Some Evidence on the Importance of Sticky Wages Author-Name: Alessandro Barattieri Author-X-Name-First: Alessandro Author-X-Name-Last: Barattieri Author-Email: barattie@bc.edu Author-WorkPlace-Name: Boston College Author-Name: Susanto Basu Author-X-Name-First: Susanto Author-X-Name-Last: Basu Author-Person: pba274 Author-WorkPlace-Name: Boston College Author-WorkPlace-Name: NBER Author-Name: Peter Gottschalk Author-X-Name-First: Peter Author-X-Name-Last: Gottschalk Author-Email: gottscha@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: Nominal wage stickiness is an important component of recent medium-scale structural macroeconomic models, but to date there has been little microeconomic evidence supporting the as- sumption of sluggish nominal wage adjustment. We present evidence on the frequency of nominal wage adjustment using data from the Survey of Income and Program Participation (SIPP) for the period 1996-1999. The SIPP provides high-frequency information on wages, employment and demographic characteristics for a large and representative sample of the US population. The main results of the analysis are as follows. 1) After correcting for measurement error, wages appear to be very sticky. In the average quarter, the probability that an individual will experience a nominal wage change is between 5 and 18 percent, depending on the samples and assumptions used. 2) The frequency of wage adjustment does not display significant seasonal patterns. 3) There is little heterogeneity in the frequency of wage adjustment across industries and occupations 4) The hazard of a nominal wage change first increases and then decreases, with a peak at 12 months. 5) The probability of a wage change is positively correlated with the unemployment rate and with the consumer price inflation rate. Series: Boston College Working Papers in Economics Number: 740 Creation-Date: 20100608 Keywords: Wage stickiness, micro-level evidence, measurement error Classification-JEL: E24, E32, J30 Publication-Status: published, American Economic Journal: Macroeconomics, 6, 70-101 File-URL: http://fmwww.bc.edu/EC-P/wp740.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:740 Template-Type: ReDIF-Paper 1.0 Title: John Rogers Commons: Are His Insights Important in Teaching Modern Labor Economics? Author-Name: Francis McLaughlin Author-X-Name-First: Francis Author-X-Name-Last: McLaughlin Author-Email: francis.mclaughlin@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: John Commons' influence in American labor economics was eclipsed after World War II by a resurgent neoclassical labor economics that gradually relegated Commons' institutional orientation to the periphery of economic discourse. A common opinion is that the work of institutional economists in the Commons tradition was largely descriptive and lacked theoretical content. Commons, however, regarded his Institutional Economics as a work of economic theory. This paper contains a description of the theoretical core of Institutional Economics and an evaluation of it from the perspective of its potential usefulness in the teaching of modern labor economics. Part I describes the theoretical perspective of neoclassical economic theory in order to clarify the institutional perspective by contrast. Part II describes Commons’ alternative perspective. Part III presents the conclusions derived from this comparison of the two alternative perspectives. Keywords: John R. Commons, labor economics, history of thought Classification-JEL: A21, B31, B41, J01 Series: Boston College Working Papers in Economics Number: 739 Creation-Date: 20100629 File-URL: http://fmwww.bc.edu/EC-P/wp739.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:739 Template-Type: ReDIF-Paper 1.0 Title: Identification of Local Treatment Effects Using a Proxy for an Instrument Author-Name: Karim Chalak Author-X-Name-First: Karim Author-X-Name-Last: Chalak Author-Email: chalak@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Person: pch561 Abstract: The method of indirect least squares (ILS) using a proxy for a discrete instrument is shown to identify a weighted average of local treatment effects. The weights are nonnegative if and only if the proxy is intensity preserving for the instrument. A similar result holds for instrumental variables (IV) methods such as two stage least squares. Thus, one should carefully interpret estimates for causal effects obtained via ILS or IV using an error-laden proxy of an instrument, a proxy for an instrument with missing or imputed observations, or a binary proxy for a multivalued instrument. Favorably, the proxy need not satisfy all the assumptions required for the instrument. Specifically, an individual's proxy can depend on others' instrument and the proxy need not affect the treatment nor be exogenous. In special cases such as with binary instrument, ILS using any suitable proxy for an instrument identifies local average treatment effects. Keywords: causality, compliance, indirect least squares, instrumental variables, local average treatment effect, measurement error, proxy, quadrant dependence, two stage least squares. Classification-JEL: C21, C25, C31, C35 Series: Boston College Working Papers in Economics Number: 738 Creation-Date: 20100501 File-URL: http://fmwww.bc.edu/EC-P/wp738.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:738 Template-Type: ReDIF-Paper 1.0 Title: A Theory of School-Choice Lotteries Author-Name: Onur Kesten Author-X-Name-First: Onur Author-X-Name-Last: Kesten Author-Email: okesten@andrew.cmu.edu Author-WorkPlace-Name: Carnegie Mellon University Author-Name: M. Utku Ünver Author-X-Name-First: M. Author-X-Name-Last: Ünver Author-Person: pun2 Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: A new centralized mechanism was introduced in New York City and Boston to assign students to public schools in district school-choice programs. This mechanism was advocated for its superior fairness property, besides others, over the mechanisms it replaced. In this paper, we introduce a new framework for investigating school-choice matching problems and two ex-ante notions of fairness in lottery design, strong ex-ante stability and ex-ante stability. This frame- work generalizes known one-to-many two-sided and one-sided matching models. We first show that the new NYC/Boston mechanism fails to satisfy these fairness properties. We then propose two new mechanisms, the fractional deferred-acceptance mechanism, which is ordinally Pareto dominant within the class of strongly ex-ante stable mechanisms, and the fractional deferred- acceptance and trading mechanism, which satisfies equal treatment of equals and constrained ordinal Pareto efficiency within the class of ex-ante stable mechanisms. Series: Boston College Working Papers in Economics Number: 737 Creation-Date: 20100501 Revision-Date: 20120629 Keywords: Matching, School Choice, Deferred Acceptance, Stability, Ordinal Efficiency, Market Design Classification-JEL: C71, C78, D71, D78 File-URL: http://fmwww.bc.edu/EC-P/wp737.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:737 Template-Type: ReDIF-Paper 1.0 Title: The Barnett Critique After Three Decades: A New Keynesian Analysis Author-Name: Michael T. Belongia Author-X-Name-First: Michael Author-X-Name-Last: Belongia Author-Workplace-Name: University of Mississippi Author-Name: Peter N. Ireland Author-X-Name-First: Peter Author-X-Name-Last: Ireland Author-Person: pir1 Author-Email: peter.ireland@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: This paper extends a New Keynesian model to include roles for currency and deposits as competing sources of liquidity services demanded by households. It shows that, both qualitatively and quantitatively, the Barnett critique applies: While a Divisia aggregate of monetary services tracks the true monetary aggregate almost perfectly, a simple-sum measure often behaves quite differently. The model also shows that movements in both quantity and price indices for monetary services correlate strongly with movements in output following a variety of real and nominal shocks. Finally, the analysis characterizes the optimal monetary policy response to shocks that originate in an explicitly-modeled financial sector. Classification-JEL: C43, E32, E41, E52 Keywords: Barnett critique, Divisia, liquidity, aggregation Series: Boston College Working Papers in Economics Number: 736 Creation-Date: 20100501 File-URL: http://fmwww.bc.edu/EC-P/wp736.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:736 Template-Type: ReDIF-Paper 1.0 Title: A New Keynesian Perspective on the Great Recession Author-Name: Peter N. Ireland Author-X-Name-First: Peter Author-X-Name-Last: Ireland Author-Person: pir1 Author-Email: peter.ireland@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: With an estimated New Keynesian model, this paper compares the "great recession" of 2007-09 to its two immediate predecessors in 1990-91 and 2001. The model attributes all three downturns to a similar mix of aggregate demand and supply disturbances. The most recent series of adverse shocks lasted longer and became more severe, however, prolonging and deepening the great recession. In addition, the zero lower bound on the nominal interest rate prevented monetary policy from stabilizing the US economy as it had previously; counterfactual simulations suggest that without this constraint, output would have recovered sooner and more quickly in 2009. Classification-JEL: E32, E52. Keywords: recession, New Keynesian, zero lower bound Series: Boston College Working Papers in Economics Number: 735 Creation-Date: 20100401 File-URL: http://fmwww.bc.edu/EC-P/wp735.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:735 Template-Type: ReDIF-Paper 1.0 Title: Identifying Structural Effects in Nonseparable Systems Using Covariates Author-Name: Halbert White Author-X-Name-First: Halbert Author-X-Name-Last: White Author-Person: pwh17 Author-Name: Karim Chalak Author-X-Name-First: Karim Author-X-Name-Last: Chalak Author-Email: chalak@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Person: pch561 Abstract: This paper demonstrates the extensive scope of an alternative to standard instrumental variables methods, namely covariate-based methods, for identifying and estimating effects of interest in general structural systems. As we show, commonly used econometric methods, specifically parametric, semi-parametric, and nonparametric extremum or moment-based methods, can all exploit covariates to estimate well-identified structural e§ects. The systems we consider are general, in that they need not impose linearity, separability, or monotonicity restrictions on the structural relations. We consider effects of multiple causes; these may be binary, categorical, or continuous. For continuous causes, we examine both marginal and non-marginal effects. We analyze effects on aspects of the response distribution generally, designed by explicit or implicit moments or as optimizers (e.g., quantiles). Key for identification is a specific conditional exogeneity relation. We examine what happens in its absence and find that identification generally fails. Nevertheless, local and near identification results hold in its absence, as we show. Keywords: conditional exogeneity; extremum estimator; identification; method of moments; nonparametric estimation; structural equations. Classification-JEL: C10, C20, C30, C50 Series: Boston College Working Papers in Economics Number: 734 Creation-Date: 20081016 File-URL: http://fmwww.bc.edu/EC-P/wp734.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:734 Template-Type: ReDIF-Paper 1.0 Title: Testing a Conditional Form of Exogeneity Author-Name: Halbert White Author-X-Name-First: Halbert Author-X-Name-Last: White Author-Person: pwh17 Author-Name: Karim Chalak Author-X-Name-First: Karim Author-X-Name-Last: Chalak Author-Email: chalak@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Person: pch561 Abstract: We give two new approaches to testing a conditional form of exogeneity. This condition ensures unconfoundedness and identification of effects of interest in structural systems. As these approaches do not rely on the absence of causal effects of treatment under the null, they complement earlier methods of Rosenbaum (1987) and Heckman and Hotz (1989). Keywords: Causality, Conditional Exogeneity, Nonparametric Test, Treatment Effect, Unconfoundedness Classification-JEL: C12, C14, C21, C31 Series: Boston College Working Papers in Economics Number: 733 Creation-Date: 20100324 File-URL: http://fmwww.bc.edu/EC-P/wp733.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:733 Template-Type: ReDIF-Paper 1.0 Title: The Incidence of Gravity Author-Name: James E. Anderson Author-X-Name-First: James Author-X-Name-Last: Anderson Author-Person: pan2 Author-Email: anderson@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: The high trade costs inferred from gravity are rarely used in the wide class of trade models. Two related problems explain this omission of a key explanatory variable. First, national seller and buyer responses to trade costs depend on their incidence rather than on the full cost. Second, the high dimensionality of bilateral trade costs requires aggregation for most practical uses in interpretation or standard trade modeling. This paper provides an intuitive description of a resolution to the aggregation and incidence problems. For each product, it is as if each province or country sells to a world market containing all buyers and buys from from that market containing all sellers, the incidence of aggregated bilateral trade costs being divided between sellers and buyers according to their location. Measures of incidence described here give intuitive insight into the consequences of geography, illustrated with results from Anderson and Yotov (2008). The integration of the incidence measures with standard general equilibrium structure opens the way to richer applied general equilibrium models and better empirical work on the origins of comparative advantage. Series: Boston College Working Papers in Economics Number: 732 Creation-Date: 20100110 Classification-JEL: F10 Publication-Status: forthcoming in The Gravity Model in International Trade: Advances and Applications, Steven Brakman and Peter Bergeijk, eds. File-URL: http://fmwww.bc.edu/EC-P/wp732.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:732 Template-Type: ReDIF-Paper 1.0 Title: Costs of Taxation and Benefits of Public Goods with Multiple Taxes and Goods Author-Name: James E. Anderson Author-X-Name-First: James Author-X-Name-Last: Anderson Author-Person: pan2 Author-Email: anderson@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Will Martin Author-Workplace-Name: World Bank Abstract: The fact that raising taxes can increase taxed labor supply through income effects is frequently used to justify greater public good provision than indicated by traditional, compensated analyses. We develop a model including multiple public goods and taxes and derive consistent measures of the marginal benefit of public goods and their marginal social cost inclusive of tax distortions using both compensated and uncompensated measures of the Marginal Cost of Funds (MCF). Our analysis confirms that the desirability of tax financed public projects is independent of whether compensated or uncompensated methods are used. The main innovation shows that the costs or benefits of providing particular public goods should be adjusted by a simple, benefit multiplier not previously seen in the literature if an uncompensated MCF is used. Series: Boston College Working Papers in Economics Number: 731 Creation-Date: 20100130 Keywords: fiscal policy; second best; public goods; distortions; costs of taxation, marginal cost of funds; marginal excess burden, thought experiment Classification-JEL: D61, F11, H21, H43 Publication-Status: Forthcoming, Journal of Public Economic Theory File-URL: http://fmwww.bc.edu/EC-P/wp731.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:731 Template-Type: ReDIF-Paper 1.0 Title: Does the tenure of Private Equity investment improve the performance of European firms? Author-Name: Oleg Badunenko Author-X-Name-First: Oleg Author-X-Name-Last: Badunenko Author-Person: pba432 Author-Workplace-Name: DIW Berlin Author-Email: dschaefer@diw.de Author-Name: Christopher F. Baum Author-X-Name-First: Christopher Author-X-Name-Last: Baum Author-Person: pba1 Author-Email: baum@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Workplace-Name: DIW Berlin Author-Name: Dorothea Schäfer Author-X-Name-First: Dorothea Author-X-Name-Last: Schäfer Author-Person: psc175 Author-Workplace-Name: DIW Berlin Author-Email: dschaefer@diw.de Abstract: The paper investigates whether the presence and tenure of Private Equity (PE) investment in European companies improves their performance. Previous studies documented the unambiguous merit of a buyout during the 1980s and 1990s for listed firms in the US and UK markets. This study analyzes such influences in both listed and unlisted European firms during 2002-2007. Our analysis suggests that short-term PE investments have, on average, a detrimental effect on firm performance. The performance of a firm that has PE backing is lower than that of a firm without PE backing in the first year of PE investment. Such an effect disappears if PE investments remain in the firm for an uninterrupted six-year term. Keywords: Private equity financing, corporate finance Classification-JEL: M14, G24, G34 Series: Boston College Working Papers in Economics Number: 730 Creation-Date: 20100301 File-URL: http://fmwww.bc.edu/EC-P/wp730.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:730 Template-Type: ReDIF-Paper 1.0 Title: The 'Boston' School-Choice Mechanism Author-Name: Fuhito Kojima Author-X-Name-First: Fuhito Author-X-Name-Last: Kojima Author-Email: fuhitokojima1979@gmail.com Author-WorkPlace-Name: Stanford University Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: M. Utku Ünver Author-X-Name-First: M. Author-X-Name-Last: Ünver Author-Person: pun2 Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: The Boston mechanism is a popular student-placement mechanism in school-choice programs around the world. We provide two characterizations of the Boston mechanism. We introduce a new axiom, respect of preference rankings. A mechanism is the Boston mechanism for some priority if and only if it respects preference rankings and satisfies consistency, resource monotonicity, and an auxiliary invariance property. In environments where each type of object has exactly one unit, as in house allocation, a characterization is given by respect of preference rankings, individual rationality, population monotonicity, and the auxiliary invariance property. Series: Boston College Working Papers in Economics Number: 729 Creation-Date: 20100204 Revision-Date: 20101008 Keywords: Mechanism design, matching, school choice, market design, Boston mechanism Classification-JEL: C78, D78 File-URL: http://fmwww.bc.edu/EC-P/wp729.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:729 Template-Type: ReDIF-Paper 1.0 Title: Productivity, Welfare and Reallocation: Theory and Firm Level Evidence Author-Name: Susanto Basu Author-X-Name-First: Susanto Author-X-Name-Last: Basu Author-Person: pba274 Author-WorkPlace-Name: Boston College Author-WorkPlace-Name: NBER Author-Name: Luigi Pascali Author-X-Name-First: Luigi Author-X-Name-Last: Pascali Author-Person: ppa551 Author-Email: luigi.pascali@bc.edu Author-WorkPlace-Name: Boston College Author-Name: Fabio Schiantarelli Author-X-Name-First: Fabio Author-X-Name-Last: Schiantarelli Author-Email: schianta@bc.edu Author-Person: psc8 Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Workplace-Name: IZA Author-Name: Luis Serven Author-X-Name-First: Luis Author-X-Name-Last: Serven Author-WorkPlace-Name: World Bank Abstract: We prove that the change in welfare of a representative consumer is summarized by the current and expected future values of the standard Solow productivity residual. The equivalence holds if the representative household maximizes utility while taking prices parametrically. This result justifies TFP as the right summary measure of welfare (even in situations where it does not properly measure technology) and makes it possible to calculate the contributions of disaggregated units (industries or firms) to aggregate welfare using readily available TFP data. Based on this finding, we compute firm and industry contributions to welfare for a set of European OECD countries (Belgium, France, Great Britain, Italy, Spain), using industry-level (EU-KLEMS) and firm-level (Amadeus) data. After adding further assumptions about technology and market structure (firms minimize costs and face common factor prices), we show that welfare change can be decomposed into three components that reject respectively technical change, aggregate distortions and allocative efficiency. Then, using theoretically appropriate firm-level data, we assess the importance of each of these components as sources of welfare improvement in the same set of European countries. Series: Boston College Working Papers in Economics Number: 728 Creation-Date: 20091123 Revision-Date: 20100712 Keywords: Productivity, Welfare, Reallocation, Technology, TFP Classification-JEL: D24, D90, E20, O47 File-URL: http://fmwww.bc.edu/EC-P/wp728.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:728 Template-Type: ReDIF-Paper 1.0 Title: Contract Incompleteness, Globalization and Vertical Structure: an Empirical Analysis Author-Name: Luigi Pascali Author-X-Name-First: Luigi Author-X-Name-Last: Pascali Author-Email: luigi.pascali@bc.edu Author-Person: ppa551 Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: This paper studies the effects of international openness and contracting institutions on vertical integration. It first derives a number of predictions regarding the interactions between trade barriers, contracting costs, technology intensity, and the extent of vertical integration from a simple model with incomplete contracts. Then it investigates these predictions using a new dataset of over 14000 firms from 45 developing countries. Consistent with theory, the effect of technology intensity of domestic producers on their likelihood to vertically integrate is decreasing in the quality of domestic contracting institutions and in international openness. Contract enforcing costs are particularly high in developing countries and their effects on the vertical structure of technological intensive firms may have significant welfare costs. If improving domestic contracting institutions is not feasible an equivalent solution is to increase openness to international trade. This would discipline domestic suppliers reducing the need for vertical integration. Classification-JEL: D23, F15, L14 Keywords: Vertical integration, Hold-up, Incomplete contracts, Trade openness Series: Boston College Working Papers in Economics Number: 727 Creation-Date: 20091123 File-URL: http://fmwww.bc.edu/EC-P/wp727.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:727 Template-Type: ReDIF-Paper 1.0 Title: The Effects of Uncertainty and Corporate Governance on Firms' Demand for Liquidity Author-Name: Christopher F. Baum Author-X-Name-First: Christopher Author-X-Name-Last: Baum Author-Person: pba1 Author-Email: baum@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Workplace-Name: DIW Berlin Author-Name: Atreya Chakraborty Author-X-Name-First: Atreya Author-X-Name-Last: Chakraborty Author-Person: pch70 Author-Workplace-Name: University of Massachusetts-Boston Author-Email: atreya.chakraborty@umb.edu Author-Name: Liyan Han Author-X-Name-First: Liyan Author-X-Name-Last: Han Author-Workplace-Name: Beihang University Author-Name: Boyan Liu Author-X-Name-First: Boyan Author-X-Name-Last: Liu Author-Workplace-Name: Beihang University Abstract: We find that U.S. corporations' demand for liquidity is sensitive to two important factors: uncertainty facing the firm and the quality of corporate governance. Following prior research, we find that both factors have important influences on firms' cash holdings. Our results also indicate that the interactions between uncertainty and governance measures are significant. From a policy perspective, these new findings indicate both governance and the nature of uncertainty may play an important role in managing liquidity risks. Policy recommendations may not only be limited to changes in financial policy but may also include changes in corporate governance. Keywords: liquidity, demand for cash, uncertainty, governance, Gindex Classification-JEL: G32, G34, E32 Series: Boston College Working Papers in Economics Number: 726 Creation-Date: 20091111 Publication-Status: Published, Applied Economics, 44:4, 515-525, 2012 File-URL: http://fmwww.bc.edu/EC-P/wp726.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:726 Template-Type: ReDIF-Paper 1.0 Title: Conditional Quantile Estimation for GARCH Models Author-Name: Zhijie Xiao Author-Email: xiaoz@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Person: pxi26 Author-Name: Roger Koenker Author-WorkPlace-Name: University of Illinois Urbana-Champaign Author-Person: pko146 Abstract: Conditional quantile estimation is an essential ingredient in modern risk management. Although GARCH processes have proven highly successful in modeling financial data it is generally recognized that it would be useful to consider a broader class of processes capable of representing more flexibly both asymmetry and tail behavior of conditional returns distributions. In this paper, we study estimation of conditional quantiles for GARCH models using quantile regression. Quantile regression estimation of GARCH models is highly nonlinear; we propose a simple and effective two-step approach of quantile regression estimation for linear GARCH time series. In the first step, we employ a quan- tile autoregression sieve approximation for the GARCH model by combining information over different quantiles; second stage estimation for the GARCH model is then carried out based on the first stage minimum distance estimation of the scale process of the time series. Asymptotic properties of the sieve approximation, the minimum distance estimators, and the final quantile regression estimators employing generated regressors are studied. These results are of independent interest and have applications in other quantile regression settings. Monte Carlo and empirical application results indicate that the proposed estimation methods outperform some existing conditional quantile estimation methods. Keywords: Quantile Regression, GARCH, Value-at-Risk Classification-JEL: C13, C21, C22 Series: Boston College Working Papers in Economics Number: 725 Creation-Date: 20090313 File-URL: http://fmwww.bc.edu/EC-P/wp725.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:725 Template-Type: ReDIF-Paper 1.0 Title: Macroeconomic Uncertainty and Credit Default Swap Spreads Author-Name: Christopher F Baum Author-X-Name-First: Christopher Author-X-Name-Last: Baum Author-Person: pba1 Author-Email: baum@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Workplace-Name: DIW Berlin Author-Name: Chi Wan Author-X-Name-First: Chi Author-X-Name-Last: Wan Author-Email: chi_wan@carleton.ca Author-Person: pwa414 Author-Workplace-Name: Carleton University Abstract: This paper empirically investigates the impact of macroeconomic uncertainty on the spreads of individual firms' credit default swaps (CDS). While existing literature ac- knowledges the importance of the levels of macroeconomic factors in determining CDS spreads, we find that the second moments of these factors--macroeconomic uncertainty--have significant explanatory power over and above that of traditional macroeconomic factors such as the risk-free rate and the Treasury term spread. Keywords: Macroeconomic uncertainty; CDS spreads; default risk; credit risk Classification-JEL: D8, G13, C23 Series: Boston College Working Papers in Economics Number: 724 Creation-Date: 20091103 Revision-Date: 20100303 Publication-Status: published, Applied Financial Economics, 20, 1163-1171, 2010. File-URL: http://fmwww.bc.edu/EC-P/wp724.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:724 Template-Type: ReDIF-Paper 1.0 Title: Housing and Debt Over the Life Cycle and Over the Business Cycle Author-Name: Matteo Iacoviello Author-X-Name-First: Matteo Author-X-Name-Last: Iacoviello Author-Email: matteo.iacoviello@bc.edu Author-Person: pia2 Author-WorkPlace-Name: Federal Reserve Board of Governors Author-Name: Marina Pavan Author-X-Name-First: Marina Author-X-Name-Last: Pavan Author-WorkPlace-Name: Universitat Jaume I Abstract: We study housing and debt in a quantitative general equilibrium model. In the cross-section, the model matches the wealth distribution, the age profiles of homeownership and mortgage debt, and the frequency of housing adjustment. In the time-series, the model matches the procyclicality and volatility of housing investment, and the procyclicality of mortgage debt. We use the model to conduct two experiments. First, we investigate the consequences of higher individual income risk and lower downpayments, and find that these two changes can explain, in the model and in the data, the reduced volatility of housing investment, the reduced procyclicality of mortgage debt, and a small fraction of the reduced volatility of GDP. Second, we use the model to look at the behavior of housing investment and mortgage debt in an experiment that mimics the Great Recession: we find that countercyclical Önancial conditions can account for large drops in housing activity and mortgage debt when the economy is hit by large negative shocks. Series: Boston College Working Papers in Economics Number: 723 Creation-Date: 20091102 Revision-Date: 20110919 Keywords: Housing, Housing Investment, Household Debt, Life-cycle Models, Income Risk, Homeownership, Dynamic Stochastic General Equilibrium Models. Classification-JEL: E22, E32, E44, E51, D92, R21 File-URL: http://fmwww.bc.edu/EC-P/wp723.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:723 Template-Type: ReDIF-Paper 1.0 Title: The Valuation Channel of External Adjustment Author-Name: Fabio Ghironi Author-X-Name-First: Fabio Author-X-Name-Last: Ghironi Author-Email: Fabio.Ghironi@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Person: pgh2 Author-Name: Jaewoo Lee Author-X-Name-First: Jaewoo Author-X-Name-Last: Lee Author-WorkPlace-Name: International Monetary Fund Author-Name: Alessandro Rebucci Author-X-Name-First: Alessandro Author-X-Name-Last: Rebucci Author-Workplace-Name: Inter-American Development Bank Abstract: International financial integration has greatly increased the scope for changes in a country's net foreign asset position through the "valuation channel" of external adjustment, namely capital gains and losses on the country's external assets and liabilities. We examine this valuation channel theoretically in a dynamic equilibrium portfolio model with international trade in equity that encompasses complete and incomplete asset market scenarios. By separating asset prices and quantities in the definition of net foreign assets, we can characterize the first-order dynamics of both valuation effects and net foreign equity holdings. First-order excess returns are unanticipated and i.i.d. in our model, but capital gains and losses on equity positions feature persistent, anticipated dynamics in response to productivity shocks. The separation of prices and quantities in net foreign assets also enables us to characterize fully the role of capital gains and losses versus the current account in the dynamics of macroeconomic aggregates. Specifically, we disentangle the roles of excess returns, capital gains, and portfolio adjustment for consumption risk sharing when financial markets are incomplete, showing how these different channels contribute to dampening (or amplifying) the impact response of the cross-country consumption differential to shocks and to keeping it constant in subsequent periods. Keywords: Current account; Equity; Net foreign assets; Risk sharing; Valuation Classification-JEL: F32; F41; G11; G15 Series: Boston College Working Papers in Economics Number: 722 Creation-Date: 20091028 File-URL: http://fmwww.bc.edu/EC-P/wp722.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:722 Template-Type: ReDIF-Paper 1.0 Title: Profit-Maximizing Matchmaker Author-Name: Hideo Konishi Author-X-Name-First: Hideo Author-X-Name-Last: Konishi Author-Person: pko35 Author-Email: konishih@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Chiu Yu Ko Author-Workplace-Name: Boston College Series: Boston College Working Papers in Economics Number: 721 Abstract: This paper considers a resource allocation mechanism that utilizes a profit-maximizing auctioneer/matchmaker in the Kelso-Crawford (1982) (many-to-one) assignment problem. We consider general and simple (individualized price) message spaces for firms' reports following Milgrom (2010). We show that in the simple message space, (i) the matchmaker's profit is always zero and an acceptable assignment is achieved in every Nash equilibrium, and (ii) the sets of stable assignments and strong Nash equilibria are equivalent. By contrast, in the general message space, the matchmaker may make a positive profit even in a strong Nash equilibrium. This shows that restricting message space not only reduces the information requirement but also improves resource allocation. Classification-JEL: C71, C72, C78 Keywords: two-sided matching problem, stable assignment, strong Nash equilibrium, coalition-proof Nash equilibrium, no-rent property, implementation theory Creation-Date: 20091028 Revision-Date: 20120423 Publication-Status: published, Games and Economic Behavior File-URL: http://fmwww.bc.edu/EC-P/wp721.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:721 Template-Type: ReDIF-Paper 1.0 Title: Goldilocks and the Licensing Firm: Choosing a Partner when Rivals are Heterogeneous Author-Name: Anthony Creane Author-Workplace-Name: Michigan State University Author-X-Name-First: Anthony Author-X-Name-Last: Creane Author-Name: Hideo Konishi Author-X-Name-First: Hideo Author-X-Name-Last: Konishi Author-Person: pko35 Author-Email: konishih@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Series: Boston College Working Papers in Economics Number: 720 Abstract: Markets are often characterized with firms of differing capabilities with more efficient firms licensing their technology to lesser firms.  We  examine the effects that the amount of the technology transferred, and the characteristics of the partner have on this licensing.  We find that a partial technology transfer can be the joint-profit minimizing transfer; no such transfer then is superior. However, under weakly concave demand, a complete transfer always increases joint profits so long as there are at least three firms in the industry.  We also establish a "Goldilocks" condition in partner selection: it is neither too efficient nor too inefficient.  Unfortunately, profitable transfers between sufficiently inefficient firms reduce welfare, while transfers from relatively efficient firms increase welfare.  However, an efficient firm might not select the least efficient partner, though it is the social-welfare-maximizing partner. Classification-JEL: D4, L24, L4 Keywords: licensing, technology transfers Creation-Date: 20091101 File-URL: http://fmwww.bc.edu/EC-P/wp720.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:720 Template-Type: ReDIF-Paper 1.0 Title: Carpooling and Congestion Pricing: HOV and HOT Lanes Author-Name: Hideo Konishi Author-X-Name-First: Hideo Author-X-Name-Last: Konishi Author-Person: pko35 Author-Email: konishih@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Se-il Mun Author-Workplace-Name: Kyoto University Series: Boston College Working Papers in Economics Number: 719 Abstract: It is often argued in the US that HOV (high occupancy vehicle) lanes are wasteful and should be converted to HOT (high occupancy vehicles and toll lanes). In this paper, we construct a simple model of commuters using a highway with multiple lanes, in which commuters are heterogeneous in their carpool organization costs. We first look at the HOV lanes and investigate under what conditions introducing HOV lanes is socially beneficial. Then we examine whether converting HOV lanes to HOT lanes improves the efficiency of road use. It is shown that the result depends on functional form and parameter values. We also discuss the effect of alternative policies: simple congestion pricing without lane division; and congestion pricing with HOV lanes. The analysis using specific functional form is presented to explicitly obtain the conditions determining the rankings of HOV, HOT, and other policies based on aggregate social cost. Classification-JEL: R41 Keywords: HOV lanes, HOT lanes, congestion pricing, transportation economics Creation-Date: 20091101 Publication-Status: published, Regional Science and Urban Economics 40, 173-186, 2010 File-URL: http://fmwww.bc.edu/EC-P/wp719.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:719 Template-Type: ReDIF-Paper 1.0 Title: Unraveling Results from Comparable Demand and Supply: An Experimental Investigation Author-Name: Muriel Niederle Author-X-Name-First: Muriel Author-X-Name-Last: Niederle Author-WorkPlace-Name: Stanford University Author-Name: Alvin E. Roth Author-X-Name-First: Alvin Author-X-Name-Last: Roth Author-WorkPlace-Name: Harvard University Author-Name: M. Utku Ünver Author-X-Name-First: M. Author-X-Name-Last: Ünver Author-Person: pun2 Author-Workplace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: Markets sometimes unravel, with offers becoming inefficiently early. Often this is attributed to competition arising from an imbalance of demand and supply, typically excess demand for workers. However this presents a puzzle, since unraveling can only occur when firms are willing to make early offers and workers are willing to accept them. We present a model and experiment in which workers’ quality becomes known only in the late part of the market. However, in equilibrium, matching can occur (inefficiently) early only when there is comparable demand and supply: a surplus of applicants, but a shortage of high quality applicants. Series: Boston College Working Papers in Economics Number: 718 Creation-Date: 20080917 Keywords: Matching, Unraveling, Experiments, Market Design, Labor Demand and Supply Classification-JEL: C78, C90, D61 File-URL: http://fmwww.bc.edu/EC-P/wp718.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:718 Template-Type: ReDIF-Paper 1.0 Title: Matching, Allocation, and Exchange of Discrete Resources Author-Name: Tayfun Sönmez Author-X-Name-First: Tayfun Author-X-Name-Last: Sönmez Author-Email: sonmezt@bc.edu Author-Person: psi57 Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: M. Utku Ünver Author-X-Name-First: M. Author-X-Name-Last: Ünver Author-Person: pun2 Author-Workplace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Series: Boston College Working Papers in Economics Number: 717 Creation-Date: 20090804 Keywords: House allocation, kidney exchange, school admissions, market design, lottery mechanisms Classification-JEL: D71, D72 File-URL: http://fmwww.bc.edu/EC-P/wp717.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:717 Template-Type: ReDIF-Paper 1.0 Title: Ideology and Existence of 50%-Majority Equilibria in Multidimensional Spatial Voting Models Author-Name: Hervé Crès Author-X-Name-First: Hervé Author-X-Name-Last: Crès Author-WorkPlace-Name: Institut d’Études Politiques de Paris Author-Name: M. Utku Ünver Author-X-Name-First: M. Author-X-Name-Last: Ünver Author-Person: pun2 Author-Workplace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: When aggregating individual preferences through the majority rule in an n-dimensional spatial voting model, the ‘worst-case’ scenario is a social choice configuration where no political equilibrium exists unless a super majority rate as high as 1 − 1/n is adopted. In this paper we assume that a lower d-dimensional (d < n) linear map spans the possible candidates’ platforms. These d ‘ideological’ dimensions imply some linkages between the n political issues. We randomize over these linkages and show that there almost surely exists a 50%-majority equilibria in the above worst-case scenario, when n grows to infinity. Moreover the equilibrium is the mean voter. The speed of convergence (toward 50%) of the super majority rate guaranteeing existence of equilibrium is computed for d = 1 and 2. Series: Boston College Working Papers in Economics Number: 716 Creation-Date: 20080917 Keywords: Spatial voting, super majority, ideology, mean voter theorem, random point set. Classification-JEL: D71, D72 File-URL: http://fmwww.bc.edu/EC-P/wp716.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:716 Template-Type: ReDIF-Paper 1.0 Title: Incentive Compatible Allocation and Exchange of Discrete Resources Author-Name: Marek Pycia Author-X-Name-First: Marek Author-X-Name-Last: Pycia Author-Email: marek.pycia@econ.uzh.ch Author-WorkPlace-Name: University of Zurich Author-Person: ppy24 Author-Name: M. Utku Ünver Author-X-Name-First: M. Author-X-Name-Last: Ünver Author-Person: pun2 Author-Workplace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: Allocation and exchange of discrete resources such as kidneys, school seats, and many other resources for which agents have single-unit demand is conducted via direct mechanisms without monetary transfers. Incentive compatibility and efficiency are primary concerns in designing such mechanisms. We show that a mechanism is indi- vidually strategy-proof and always selects the efficient outcome with respect to some Arrovian social welfare function if and only if the mechanism is group strategy-proof and Pareto efficient. We construct the full class of these mechanisms and show that each of them can be implemented by endowing agents with control rights over resources. This new class, which we call trading cycles, contains new mechanisms as well as known mechanisms such as top trading cycles, serial dictatorships, and hierarchical exchange. We illustrate how one can use our construction to show what can and what cannot be achieved in a variety of allocation and exchange problems, and we provide an example in which the new trading-cycles mechanisms strictly Lorenz dominate all previously known mechanisms. Series: Boston College Working Papers in Economics Number: 715 Creation-Date: 20090101 Revision-Date: 20140311 Keywords: Mechanism design, group strategy-proofness, Pareto efficiency, matching, house allocation, house exchange, outside options Note: Previously circulated as "A Theory of House Allocation and Exchange Mechanisms" Classification-JEL: C78, D78 File-URL: http://fmwww.bc.edu/EC-P/wp715.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:715 Template-Type: ReDIF-Paper 1.0 Title: Attitudes, Policies and Work Author-Name: Francesco Giavazzi Author-X-Name-First: Francesco Author-X-Name-Last: Giavazzi Author-WorkPlace-Name: IGIER, Bocconi University Author-Name: Fabio Schiantarelli Author-X-Name-First: Fabio Author-X-Name-Last: Schiantarelli Author-Email: schianta@bc.edu Author-Person: psc8 Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Workplace-Name: IZA Author-Name: Michel Serafinelli Author-X-Name-First: Michel Author-X-Name-Last: Serafinelli Author-WorkPlace-Name: University of California, Berkeley Abstract: We study whether cultural attitudes towards gender, the young, and leisure are significant determinants of the employment rates of women and of the young, and of hours worked. We do this controlling for policies, institutions and other structural characteristics of the economy which may ináuence labor market outcomes. We identify a country-specific effect of culture exploiting the evolution over time within country as well as across countries, of cultural attitudes. We also address the endogeneity of attitudes, policies and institutions, and allow for the persistent nature of labor market outcomes. We find that culture matters for women employment rates and for hours worked. However, policies, in particular employment protection legislation and taxes, are also important and their quantitative impact substantial. Series: Boston College Working Papers in Economics Number: 714 Creation-Date: 20090930 Revision-Date: 20120213 Keywords: culture, attitudes, labor market outcomes Classification-JEL: J16, J22, J23, Z1 Note: previously circulated as "Culture, Policies and Labor Market Outcomes" Publication-Status: forthcoming, Journal of the European Economic Association File-URL: http://fmwww.bc.edu/EC-P/wp714.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:714 Template-Type: ReDIF-Paper 1.0 Title: Stochastic Growth in the United States and Euro Area Author-Name: Peter N. Ireland Author-X-Name-First: Peter Author-X-Name-Last: Ireland Author-Person: pir1 Author-Email: peter.ireland@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: This paper constructs a two-country stochastic growth model in which neutral and investment-specific technology shocks are nonstationary but cointegrated across economies. It uses this model to interpret data showing that while real investment has grown faster than real consumption in the United States since 1970, the opposite has been true in the Euro Area. The model, when estimated with these data, reveals that the EA missed out on the rapid investment-specific technological change enjoyed in the US during the 1990s; the EA, however, experienced more rapid neutral technological progress while the US economy stagnated during the 1970s. Classification-JEL: E32, F41, F43, O41, O47 Keywords: growth, shocks, Euro area, technological change Series: Boston College Working Papers in Economics Number: 713 Creation-Date: 20090930 Revision-Date: 20100801 File-URL: http://fmwww.bc.edu/EC-P/wp713.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:713 Template-Type: ReDIF-Paper 1.0 Title: The Effects of Future Capital Investment and R&D Expenditures on Firms' Liquidity Author-Name: Christopher F Baum Author-X-Name-First: Christopher Author-X-Name-Last: Baum Author-Person: pba1 Author-Email: baum@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Workplace-Name: DIW Berlin Author-Name: Mustafa Caglayan Author-X-Name-First: Mustafa Author-X-Name-Last: Caglayan Author-Person: pca30 Author-Workplace-Name: Heriot-Watt University Author-Name: Oleksandr Talavera Author-X-Name-First: Oleksandr Author-X-Name-Last: Talavera Author-Person: pta65 Author-Email: oleksandr.talavera@googlemail.com Author-Workplace-Name: University of Sheffield Abstract: The paper explores factors that lead to accumulation or decumulation of firms' cash reserves. In particular, we empirically examine whether additional future fixed capital and R&D investment expenditures induce firms to change their liquidity ratio while considering the role of market imperfections. Implementing a dynamic framework on a panel of US, UK and German firms, we find that firms in all three countries make larger adjustments to cash holdings when they plan additional future R&D rather than fixed capital investment expenditures. This behavior is particularly prevalent among financially constrained firms. Keywords: cash holdings, fixed investment, R&D investment, dynamic panel regressions Classification-JEL: G21, G32 Note: previously circulated as "Corporate Liquidity Management and Future Investment Expenditures" Publication-Status: published, Review of International Economics, 21:3, 459-474, 2013 Series: Boston College Working Papers in Economics Number: 712 Creation-Date: 20090923 Revision-Date: 20120723 File-URL: http://fmwww.bc.edu/EC-P/wp712.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:712 Template-Type: ReDIF-Paper 1.0 Title: Transitive Regret Author-Name: Sushil Bikhchandani Author-X-Name-First: Sushil Author-X-Name-Last: Bikhchandani Author-Workplace-Name: UCLA Author-Name: Uzi Segal Author-X-Name-First: Uzi Author-X-Name-Last: Segal Author-Person: pse40 Author-Email: uzi.segal@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Series: Boston College Working Papers in Economics Number: 711 Abstract: Preferences may arise from regret, i.e., from comparisons with alternatives forgone by the decision maker. We ask whether regret-based behavior is consistent with non-expected utility theories of transitive choice. We show that the answer is no. If choices are governed by ex ante regret and elation then non-expected utility preferences must be intransitive. Creation-Date: 20090904 Revision-Date: 20091024 Length: 17 pages Classification-JEL: D03, D81 Keywords: transitivity, regret, expected utility File-URL: http://fmwww.bc.edu/EC-P/wp711.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:711 Template-Type: ReDIF-Paper 1.0 Title: Efficient Mixed Clubs: Nonlinear-Pricing Equilibria with Entrepreneurial Managers Author-Name: Hideo Konishi Author-X-Name-First: Hideo Author-X-Name-Last: Konishi Author-Person: pko35 Author-Email: konishih@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Series: Boston College Working Papers in Economics Number: 710 Abstract: Scotchmer and Wooders (1987) show that efficient clubs are homogeneous when consumers are divisible in Berglas's (1976) anonymous crowding model. However, if consumers are not divisible or if clubs have multiple facilities with economies of scope, mixed clubs are efficient. In such a model, we consider clubs with multiple membership policies for different types of consumers, and show the existence and efficiency of equilibrium with nonlinear policies. We employ entrepreneurial equilibrium, an equilibrium concept with profit-seeking entrepreneurs. In our model, club managers and members of clubs care only about the members' actions, not their types. The equilibrium is efficient in our adverse selection model due to this "anonymity" of crowding effects. Our theorem can be regarded as showing the existence of a core allocation that satisfies envy-free property in the absence of nonanonymous crowding effects. Classification-JEL: D51, D62, H41, H70 Keywords: club goods, mixed club, efficiency, equilibrium, entrepreneurship, nonlinear contract, envy-free, core Creation-Date: 20090714 Revision-Date: 20090908 Length: 40 pages Publication-Status: published, Japanese Economic Review, 61, 35-63, 2010, the 2009 JEA Nakahara Prize Lecture. Note: Previously circulated as "Market for Clubs with Congestible Facilities:  Nonlinear-Pricing Equilibria with Entrepreneurial Managers" File-URL: http://fmwww.bc.edu/EC-P/wp710.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:710 Template-Type: ReDIF-Paper 1.0 Title: Tests for Changing Mean with Monotonic Power Author-Name: Ted Juhl Author-WorkPlace-Name: University of Kansas Author-Email: juhl@ku.edu Author-Name: Zhijie Xiao Author-Email: xiaoz@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Person: pxi26 Abstract: Several widely used tests for a changing mean exhibit nonmonotonic power in finite samples due to "incorrect" estimation of nuisance parameters under the alternative. In this paper, we study the issue of nonmonotonic power in testing for changing mean. We investigate the asymptotic power properties of the tests using a new framework where alternatives are characterized as having "large" changes. The asymptotic analysis provides a theoretical explanation to the power problem. Modified tests that have monotonic power against a wide range of alternatives of structural change are proposed. Instead of estimating the nuisance parameters based on ordinary least squares residuals, the proposed tests use modified estimators based on nonparametric regression residuals. It is shown that tests based on the modified long-run variance estimator provide an improved rate of divergence of the tests under the alternative of a change in mean. Tests for structural breaks based on such an estimator are able to remain consistent while still retaining the same asymptotic distribution under the null hypothesis of constant mean. Keywords: stability, changing parameters, time varying parameters Classification-JEL: C22 Series: Boston College Working Papers in Economics Number: 709 Creation-Date: 20090617 Length: 34 pages File-URL: http://fmwww.bc.edu/EC-P/wp709.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:709 Template-Type: ReDIF-Paper 1.0 Title: Quantile Cointegrating Regression Author-Name: Zhijie Xiao Author-Email: xiaoz@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Person: pxi26 Abstract: Quantile regression has important applications in risk management, portfolio optimization, and asset pricing. The current paper studies estimation, inference and financial applications of quantile regression with cointegrated time series. In addition, a new cointegration model with varying coefficients is proposed. In the proposed model, the value of cointegrating coefficients may be affected by the shocks and thus may vary over the innovation quantile. The proposed model may be viewed as a stochastic cointegration model which includes the conventional cointegration model as a special case. It also provides a useful complement to cointegration models with (G)ARCH effects. Asymptotic properties of the proposed model and limiting distribution of the cointegrating regression quantiles are derived. In the presence of endogenous regressors, fully-modified quantile regression estimators and augmented quantile cointegrating regression are proposed to remove the second order bias and nuisance parameters. Regression Wald test are constructed based on the fully modified quantile regression estimators. An empirical application to stock index data highlights the potential of the proposed method. Keywords: ARCH/GARCH, Cointegration, Portfolio Optimization, Quantile Regression, Time Varying Classification-JEL: C22, G1 Series: Boston College Working Papers in Economics Number: 708 Creation-Date: 20090131 Length: 33 pages File-URL: http://fmwww.bc.edu/EC-P/wp708.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:708 Template-Type: ReDIF-Paper 1.0 Title: Nonparametric Identification of a Binary Random Factor in Cross Section Data Author-Name: Yingying Dong Author-X-Name-First: Yingying Author-X-Name-Last: Dong Author-Workplace-Name: California State University, Fullerton Author-Person: pdo242 Author-Name: Arthur Lewbel Author-X-Name-First:Arthur Author-X-Name-Last: Lewbel Author-Person: ple43 Author-Email: lewbel@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: Suppose V and U are two independent mean zero random variables, where V has an asymmetric distribution with two mass points and U has a symmetric distribution. We show that the distributions of V and U are nonparametrically identified just from observing the sum V+U, and provide a rate root n estimator. We apply these results to the world income distribution to measure the extent of convergence over time, where the values V can take on correspond to country types, i.e., wealthy versus poor countries. We also extend our results to include covariates X, showing that we can nonparametrically identify and estimate cross section regression models of the form Y=g(X,D*)+U, where D* is an unobserved binary regressor. Keywords: Mixture model, Random effects, Binary, Unobserved factor, Unobserved regressor, Nonparametric identification, Deconvolution, Treatment Classification-JEL: C25, C21 Series: Boston College Working Papers in Economics Number: 707 Creation-Date: 20090616 Revision-Date: 20100701 File-URL: http://fmwww.bc.edu/EC-P/wp707.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:707 Template-Type: ReDIF-Paper 1.0 Title: The Three Epochs of Oil Author-Name: Eyal Dvir Author-X-Name-First: Eyal Author-X-Name-Last: Dvir Author-Person: pdv5 Author-Email: dvire@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Ken Rogoff Author-X-Name-First: Ken Author-X-Name-Last: Rogoff Author-Person: pro164 Author-Workplace-Name: Harvard University Abstract: We test for changes in price behavior in the longest crude oil price series available (1861-2008). We find strong evidence for changes in persistence and in volatility of price across three well defined periods. We argue that historically, the real price of oil has tended to be highly persistent and volatile whenever rapid industrialization in a major world economy coincided with uncertainty regarding access to supply. We present a modified commodity storage model that fully incorporates demand, and further can accommodate both transitory and permanent shocks. We show that the role of storage when demand is subject to persistent growth shocks is speculative, instead of its classic mitigating role. This result helps to account for the increased volatility of oil price we observe in these periods. Keywords: Oil Price, Oil Shocks, Storage, Structural Change Classification-JEL: E0, Q4, L7, N5 Series: Boston College Working Papers in Economics Number: 706 Creation-Date: 20090423 File-URL: http://fmwww.bc.edu/EC-P/wp706.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:706 Template-Type: ReDIF-Paper 1.0 Title: Parliamentary Election Cycles and the Turkish Banking Sector Author-Name: Christopher F. Baum Author-X-Name-First: Christopher Author-X-Name-Last: Baum Author-Person: pba1 Author-Email: baum@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Workplace-Name: DIW Berlin Author-Name: Mustafa Caglayan Author-X-Name-First: Mustafa Author-X-Name-Last: Caglayan Author-Person: pca30 Author-Workplace-Name: University of Sheffield Author-Name: Oleksandr Talavera Author-X-Name-First: Oleksandr Author-X-Name-Last: Talavera Author-Person: pta65 Author-Email: oleksandr.talavera@googlemail.com Author-Workplace-Name: University of East Anglia Abstract: This paper analyzes the effects of parliamentary election cycles on the Turkish banking system. Using annual bank-level data representing all banks in Turkey during 1963-2007, we find that there are meaningful differences in the structure of assets, liabilities and financial performance across different stages of the parliamentary election cycle. However, we find that government-owned banks operate similarly to both domestic and foreign-owned private sector banks before, during and after elections. Our estimates also show that government-owned banks underperform their domestic and foreign-owned private sector counterparts. Keywords: elections, state banks, domestic banks, foreign-owned banks, loans, interest rate margin Classification-JEL: G21, G28 Series: Boston College Working Papers in Economics Number: 705 Publication-Status: published, Journal of Banking and Finance, 34, 2709-2719, 2010. Creation-Date: 20090212 Revision-Date: 20100514 File-URL: http://fmwww.bc.edu/EC-P/wp705.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:705 Template-Type: ReDIF-Paper 1.0 Title: The Collective Marriage Matching Model: Identification, Estimation and Testing Author-Name: Eugene Choo Author-Workplace-Name: University of Calgary Author-Name: Shannon Seitz Author-X-Name-First: Shannon Author-X-Name-Last: Seitz Author-Person: pse14 Author-Email: seitzsh@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Aloysuis Siow Author-Workplace-Name: University of Toronto Abstract: We develop and estimate an empirical collective model with endogenous marriage formation, participation, and family labor supply. Intra-household transfers arise endogenously as the transfers that clear the marriage market. The intra-household allocation can be recovered from observations on marriage decisions. Introducing the marriage market in the collective model allows us to independently estimate transfers from labor supplies and from marriage decisions. We esti- mate a semi-parametric version of our model using 2000 US Census data. Estimates of the model using marriage data are much more consistent with the theoretical predictions than estimates derived from labor supply. Series: Boston College Working Papers in Economics Number: 704 Creation-Date: 20081008 Keywords: matching, marriage, family labor supply Classification-JEL: J12, J22 File-URL: http://fmwww.bc.edu/EC-P/wp704.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:704 Template-Type: ReDIF-Paper 1.0 Title: Commercial Policy in a Predatory World Author-Name: James E. Anderson Author-X-Name-First: James Author-X-Name-Last: Anderson Author-Person: pan2 Author-Email: anderson@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: Predation---extortion or theft---imposes significant endogenous costs on trade, with rich implications for trade policy. The model of this paper shows that the response of trade to liberalization depends on the strength of enforcement against predators. Efficient commercial policy may either tax or subsidize trade. The Mercantilist predilection for trade monopoly and for subsidy has a rationale. Insecurity induces an international externality alternative that of the standard terms of trade effect. Tolerance or intolerance of smuggling can be rational depending on the weakness or strength of enforcement, illustrated by the switch from the former to the latter by Britain in regard to its North American colonies. Series: Boston College Working Papers in Economics Number: 703 Creation-Date: 20080501 Keywords: commercial policy, predation, extortion, theft, trade costs, trade policy Classification-JEL: F13, O17, K42 File-URL: http://fmwww.bc.edu/EC-P/wp703.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:703 Template-Type: ReDIF-Paper 1.0 Title: Consistent Trade Policy Aggregation Author-Name: James E. Anderson Author-X-Name-First: James Author-X-Name-Last: Anderson Author-Person: pan2 Author-Email: anderson@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: Much empirical work requires the aggregation of policies. This paper provides methods of policy aggregation that are consistent with two common objectives of empirical work. One is to preserve real income. The other is to preserve the real volume of activity in one or more parts of the economy. Trade policy aggregation is an acute example of the aggregation problem with thousands of highly dispersed trade barriers to be aggregated. An application to India shows that the standard atheoretic method of aggregation is seriously misleading compared to the consistent method. Series: Boston College Working Papers in Economics Number: 702 Creation-Date: 20080501 Publication-Status: published, International Economic Review, 50, 903-927, 2009. Keywords: trade barriers, policy aggregation Classification-JEL: File-URL: http://fmwww.bc.edu/EC-P/wp702.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:702 Template-Type: ReDIF-Paper 1.0 Title: Terrorism, Trade and Public Policy Author-Name: James E. Anderson Author-X-Name-First: James Author-X-Name-Last: Anderson Author-Person: pan2 Author-Email: anderson@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: Are bigger markets safer? How should government policy respond to terrorist threats? Trade draws potential terrorists and economic predators into productive activity, but trade also draws terrorist attacks. Larger trade reduces the risk of terrorist attack when the wage elasticity is high, associated with low ratios of predators to prey and high wages; but it may increase the risk of terrorist attack when the wage elasticity is low, associated with high ratios of predators to prey. Anti-terrorist trade policy should always promote trade in simultaneous play. Government first mover advantage and inelastic wage may imply trade restriction. Tolerance of smuggling may improve security. Better enforcement should ordinarily be provided for bigger, inherently safer and higher wage markets. Series: Boston College Working Papers in Economics Number: 701 Creation-Date: 20081201 Keywords: terrorism, trade, policy, predation, smuggling Classification-JEL: F13, O17, K42 File-URL: http://fmwww.bc.edu/EC-P/wp701.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:701 Template-Type: ReDIF-Paper 1.0 Title: Gravity, Productivity and the Pattern of Production and Trade Author-Name: James E. Anderson Author-X-Name-First: James Author-X-Name-Last: Anderson Author-Person: pan2 Author-Email: anderson@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: The aggregated incidence of bilateral trade costs is derived from the gravity model. Incidence is equivalent to a TFP penalty. Sectoral and national differences in TFP have sharp implications for the equilibrium pattern of production and trade in a specific factors model of production. Unskilled labor is intersectorally mobile. Skilled labor acquires sector specific skills. Productivity shocks cause incidence shock that induce ex post inefficient allocation of skilled labor. Below (above) average TFP sectors produce less and have below (above) average skill premia. Ex ante efficient allocation is lower in sectors with riskier TFP incidence, despite risk neutrality. Series: Boston College Working Papers in Economics Number: 700 Creation-Date: 20081201 Keywords: gravity model, trade costs, total factor productivity Classification-JEL: F10, D24 File-URL: http://fmwww.bc.edu/EC-P/wp700.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:700 Template-Type: ReDIF-Paper 1.0 Title: Globalization and Income Distribution: A Specific Factors Continuum Approach Author-Name: James E. Anderson Author-X-Name-First: James Author-X-Name-Last: Anderson Author-Person: pan2 Author-Email: anderson@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: Does globalization widen inequality or increase income risk? Globalization amplifies the effect of idiosyncratic relative productivity shocks. But wider markets reduce the effect of economy-wide supply shocks on world prices. Both forces are at work in the specific factors continuum model of this paper. Ex post equilibrium exhibits positive (negative) premia for export (import-competing) sector specific factors. Globalization widens inequality in North and South. Globalization increases personal income risk from idiosyncratic productivity shocks, but reduces aggregate shock risk acting on the factoral terms of trade. Both forces have their greatest impact on the poorest and least impact for the richest trading sectors, while the distribution in nontraded sectors is unaffected. Series: Boston College Working Papers in Economics Number: 699 Creation-Date: 20081201 Keywords: globalization, income distribution, inequality, trade, productivity Classification-JEL: F10 File-URL: http://fmwww.bc.edu/EC-P/wp699.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:699 Template-Type: ReDIF-Paper 1.0 Title: The Changing Incidence of Geography Author-Name: James E. Anderson Author-X-Name-First: James Author-X-Name-Last: Anderson Author-Person: pan2 Author-Email: anderson@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Yoto V. Yotov Author-X-Name-First: Yoto Author-X-Name-Last: Yotov Author-Workplace-Name: Drexel University Author-Person: pyo93 Abstract: Neglected properties of the structural gravity model offer a theoretically consistent method to calculate the incidence of estimated trade costs, disaggregated by commodity and region, and re-aggregated into forms useful for economic geography. For Canada's provinces, 1992-2003, incidence is on average some five times higher for sellers than for buyers. Sellers' incidence falls over time due to specialization, despite constant gravity coefficients. This previously unrecognized globalizing force drives big reductions in 'constructed home bias', the disproportionate share of local trade; and large but varying gains in real GDP. Aggregation biases gravity coefficients downward. Series: Boston College Working Papers in Economics Number: 698 Creation-Date: 20080901 Keywords: geography, gravity model, rade costs, globalization Classification-JEL: F10, D24 Publication-Status: forthcoming, American Economic Review File-URL: http://fmwww.bc.edu/EC-P/wp698.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:698 Template-Type: ReDIF-Paper 1.0 Title: Trends in the Transitory Variance of Male Earnings in the U.S., 1970-2004 Author-Name: Robert Moffitt Author-Workplace-Name: Johns Hopkins University Author-Name: Peter Gottschalk Author-X-Name-First: Peter Author-X-Name-Last: Gottschalk Author-Email: peter.gottschalk@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Series: Boston College Working Papers in Economics Number: 697 Abstract: We estimate the trend in the transitory variance of male earnings in the U.S. using the Michigan Panel Study of Income Dynamics from 1970 to 2004. Using both an error components model as well as simpler but more approximate methods, we find that the transitory variance increased substantially in the 1980’s and then remained at this new higher level through 2004 We also find a strong cyclical component to the transitory variance. Its increase accounts for between 30 and 65 percent of the total rise in cross-sectional variance, depending on the time period. The cross-sectional variance has recently increased but this reflects a rise in the variance of the permanent component, not the transitory component. Increases in transitory variance occurred for less educated in the early 1980s and for more educated workers in the later 1980s and early 1990s. Creation-Date: 20081230 Length: 49 pages File-URL: http://fmwww.bc.edu/EC-P/wp697.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:697 Template-Type: ReDIF-Paper 1.0 Title: Trends in the Transitory Variance of Male Earnings in the U.S., 1991-2003: Preliminary Evidence from LEHD data Author-Name: Peter Gottschalk Author-X-Name-First: Peter Author-X-Name-Last: Gottschalk Author-Email: peter.gottschalk@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Erika McEntarfer Author-Workplace-Name: U.S. Department of the Treasury Author-Name: Robert Moffitt Author-Workplace-Name: Johns Hopkins University Series: Boston College Working Papers in Economics Number: 696 Abstract: We estimate the trend in the transitory variance of male earnings in the U.S. from 1991 to 2005 using an administrative data set of Unemployment Insurance wage reports, the Longitudinal Employer-Employer Dynamics data set (LEHD), and compare the findings to those of Moffitt and Gottschalk (2008) obtained from the Michigan Panel Study of Income Dynamics (PSID). Despite substantial differences between the LEHD and the PSID in the levels of cross- sectional variances of male earnings, the changes over time in transitory variances obtained from estimating two of the models in Moffitt and Gottschalk are quite similar in the two data sets. Specifically, over the 1991-2003 period, transitory variances fell slightly, and then rose slightly, returning in 2003 to the same approximate level they had obtained in 1991. Overall, the analysis of the LEHD data confirms the findings based on the PSID that the transitory variance did not show a trend net of cycle over this period. Creation-Date: 20081230 Length: 31 pages File-URL: http://fmwww.bc.edu/EC-P/wp696.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:696 Template-Type: ReDIF-Paper 1.0 Title: The Volatility of International Trade Flows and Exchange Rate Uncertainty Author-Name: Christopher F. Baum Author-X-Name-First: Christopher Author-X-Name-Last: Baum Author-Person: pba1 Author-Email: baum@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Workplace-Name: DIW Berlin Author-Name: Mustafa Caglayan Author-X-Name-First: Mustafa Author-X-Name-Last: Caglayan Author-Person: pca30 Author-Workplace-Name: University of Sheffield Abstract: Empirical evidence obtained from data covering Eurozone countries, other industrialized countries, and newly industrialized countries (NICs) over 1980–2006 shows that exchange rate uncertainty has a consistent positive and significant effect on the volatility of bilateral trade flows. A one standard deviation increase in exchange rate uncertainty leads to an eight per cent increase in trade volatility. These effects differ markedly for trade flows between industrialized countries and NICs, and are not mitigated by the presence of the Eurozone. Contrary to earlier findings, our results also suggest that exchange rate uncertainty does not affect the volume of trade flows of either industrialized countries or NICs. Keywords: exchange rates, uncertainty, volatility, trade flows, industrialized countries, Eurozone, newly industrialized countries Classification-JEL: F17, F31, C22 Series: Boston College Working Papers in Economics Number: 695 Creation-Date: 20081127 File-URL: http://fmwww.bc.edu/EC-P/wp695.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:695 Template-Type: ReDIF-Paper 1.0 Title: Estimation of Collective Household Models With Engel Curves Author-Name: Arthur Lewbel Author-X-Name-First:Arthur Author-X-Name-Last: Lewbel Author-Person: ple43 Author-Email: lewbel@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Krishna Pendakur Author-Workplace-Name: Simon Fraser University Abstract: The structural consumer demand methods used to estimate the parameters of collective household models are typically either very restrictive and easy to implement or very general and difficult to estimate. In this paper, we provide a middle ground. We adapt the very general framework of Browning, Chiappori and Lewbel (2007) by adding a simple restriction that recasts the empirical model from a highly nonlinear demand system with price variation to a slightly nonlinear Engel curve system. Our restriction has an interpretation in terms of the behaviour of household scale economies and is testable. Our method identifies the levels of (not just changes in) household resource shares, and a variant of equivalence scales called indifference scales. We apply our methodology to Canadian expenditure data. Keywords: Consumer Demand, Collective Model, Sharing rule, Household Bargaining, Bargaining Power, Indifference Scales, Adult Equivalence Scales, Demand Systems, Barten Scales, Nonparametric Identification. Classification-JEL: D12, D11, C30, I31, J12 Series: Boston College Working Papers in Economics Number: 694 Creation-Date: 20080501 Length: 17 pages File-URL: http://fmwww.bc.edu/EC-P/wp694.pdf File-Format: application/pdf File-Size: 168 Kb File-Function: main text Handle: RePEc:boc:bocoec:694 Template-Type: ReDIF-Paper 1.0 Author-Name: Francis X. Diebold Author-X-Name-First: Francis Author-X-Name-Last: Diebold Author-Email: fdiebold@sas.upenn.edu Author-Workplace-Name: Department of Economics, University of Pennsylvania Author-Name: Georg H. Strasser Author-X-Name-First: Georg Author-X-Name-Last: Strasser Author-Person: pst327 Author-Email: Georg.Strasser@bc.edu Author-Workplace-Name: Department of Economics, Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Title: On the Correlation Structure of Microstructure Noise: A Financial Economic Approach Abstract: We introduce the financial economics of market microstructure into the financial econometrics of asset return volatility estimation. In particular, we use market microstructure theory to derive the cross-correlation function between latent returns and market microstructure noise, which feature prominently in the recent volatility literature. The cross-correlation at zero displacement is typically negative, and cross- correlations at nonzero displacements are positive and decay geometrically. If market makers are sufficiently risk averse, however, the cross-correlation pattern is inverted. We derive model-based volatility estimators, which we apply to stock and oil prices. Our results are useful for assessing the validity of the frequently-assumed independence of latent price and microstructure noise, for explaining observed cross-correlation patterns, for predicting as-yet undiscovered patterns, and for microstructure-based volatil- ity estimation. Creation-Date: 20081009 Revision-Date: 20120424 File-URL: http://fmwww.bc.edu/EC-P/wp693.pdf File-Format: application/pdf File-Function: main text Classification-JEL: G14,G20,D82,D83,C51 Publication-Status: published, Review of Economic Studies, 80:4, 1304-1337 Series: Boston College Working Papers in Economics Number: 693 Keywords: Realized volatility, Market microstructure theory, High-frequency data, Financial econometrics Note: previously circulated as "On the Correlation Structure of Microstructure Noise in Theory and Practice" Handle: RePEc:boc:bocoec:693 Template-Type: ReDIF-Paper 1.0 Title: An Extended Class of Instrumental Variables for the Estimation of Causal Effects Author-Name: Karim Chalak Author-X-Name-First: Karim Author-X-Name-Last: Chalak Author-Email: chalak@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Person: pch561 Author-Name: Halbert White Author-X-Name-First: Halbert Author-X-Name-Last: White Author-Person: pwh17 Abstract: This paper examines the ways in which structural systems can yield observed variables, other than the cause or treatment of interest, that can play an instrumental role in identifying and estimating causal effects. We focus speciÖcally on the ways in which structures determine exclusion restrictions and conditional exogeneity relations that act to ensure identification. We show that by carefully specifying the structural equations and by extending the standard notion of instrumental variables, one can identify and estimate causal effects in the endogenous regressor case for a broad range of economically relevant structures. Some of these have not previously been recognized. Our results there create new opportunities for identifying and estimating causal effects in non-experimental situations. Our results for more familiar structures provide new insights. For example, we extend results of Angrist, Imbens, and Rubin (1996) by taking into account an important distinction between cases where Z is an observed exogenous instrument and those where it is a proxy for an unobserved exogenous instrument. A main message emerging from our analysis is the central importance of sufficiently specifying the causal relations governing the unobservables, as these play a crucial role in creating obstacles or opportunities for identification. Because our results exhaust the possibilities for identification, we ensure that there are no other opportunities for identification based on exclusion restrictions and conditional independence relations still to be discovered. To accomplish this characterization, we introduce notions of conditioning and conditional extended instrumental variables (EIVs). These are not proper instruments, as they are endogenous. They nevertheless permit identification and estimation of causal effects. We analyze methods using these EIVs either singly or jointly. Keywords: causality, conditional exogeneity, endogeneity, exogeneity, identification, instrumental variables, and simultaneous equations. Classification-JEL: C10, C13, C20, C30, C51 Series: Boston College Working Papers in Economics Number: 692 Creation-Date: 20071123 Revision-Date: 20091130 File-URL: http://fmwww.bc.edu/EC-P/wp692.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:692 Template-Type: ReDIF-Paper 1.0 Title: Copula-Based Nonlinear Quantile Autoregression Author-Name: Xiaohong Chen Author-X-Name-First: Xiaohong Author-X-Name-Last: Chen Author-Email: xiaohong.chen@yale.edu Author-WorkPlace-Name: Yale University Author-Name: Roger Koenker Author-X-Name-First: Roger Author-X-Name-Last: Koenker Author-WorkPlace-Name: University of Illinois at Urbana-Champaign Author-Email: rkoenker@uiuc.edu Author-Name: Zhijie Xiao Author-Email: xiaoz@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Person: pxi26 Abstract: Parametric copulas are shown to be attractive devices for specifying quantile autoregressive models for nonlinear time-series. Estimation of local, quantile-specific copula-based time series models offers some salient advantages over classical global parametric approaches. Consistency and asymptotic normality of the proposed quantile estimators are established under mild conditions, allowing for global misspecification of parametric copulas and marginals, and without assuming any mixing rate condition. These results lead to a general framework for inference and model specification testing of extreme conditional value-at-risk for financial time series data. Keywords: Quantile autoregression, Copula, Ergodic nonlinear Markov models Classification-JEL: C10, C13, C22 Series: Boston College Working Papers in Economics Number: 691 Creation-Date: 20081008 Length: 31 pages File-URL: http://fmwww.bc.edu/EC-P/wp691.pdf File-Format: application/pdf File-Size: 244 Kb File-Function: main text Handle: RePEc:boc:bocoec:691 Template-Type: ReDIF-Paper 1.0 Title: The Impact of the Financial System's Structure on Firms' Financial Constraints Author-Name: Christopher F. Baum Author-X-Name-First: Christopher Author-X-Name-Last: Baum Author-Person: pba1 Author-Email: baum@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Workplace-Name: DIW Berlin Author-Name: Dorothea Schäfer Author-X-Name-First: Dorothea Author-X-Name-Last: Schäfer Author-Person: psc175 Author-Workplace-Name: DIW Berlin Author-Email: dschaefer@diw.de Author-Name: Oleksandr Talavera Author-X-Name-First: Oleksandr Author-X-Name-Last: Talavera Author-Person: pta65 Author-Workplace-Name: University of East Anglia Abstract: We estimate firms' cash flow sensitivity of cash to empirically test how the financial system's structure and activity level influence their financial constraints. For this purpose we merge Almeida et al. (2004), a path-breaking new design for evaluating a firm's financial constraints, with Levine (2002), who paved the way for comparative analysis of financial systems around the world. We conjecture that a country's financial system, both in terms of its structure and its level of development, influences the cash flow sensitivity of cash of constrained firms but leaves unconstrained firms unaffected. We test our hypothesis with a large international sample of 80,000 firm-years from 1989 to 2006. Our findings reveal that both the structure of the financial system and its level of development matter. Bank-based financial systems provide the constrained firms with easier access to external financing. Keywords: financial constraints, financial structure, financial development, cash flow sensitivity of cash Classification-JEL: G32, G30 Publication-Status: published, Journal of International Money and Finance, 2011, 30, 678-691 Series: Boston College Working Papers in Economics Number: 690 Creation-Date: 20081008 Revision-Date: 20100903 File-URL: http://fmwww.bc.edu/EC-P/wp690.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:690 Template-Type: ReDIF-Paper 1.0 Title: Causality, Conditional Independence, and Graphical Separation in Settable Systems Author-Name: Karim Chalak Author-X-Name-First: Karim Author-X-Name-Last: Chalak Author-Email: chalak@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Person: pch561 Author-Name: Halbert White Author-X-Name-First: Halbert Author-X-Name-Last: White Author-WorkPlace-Name: University of California-San Diego Author-Person: pwh17 Abstract: We study the interrelations between (conditional) independence and causal relations in settable systems. We provide definitions in terms of functional dependence for direct, indirect, and total causality as well as for (indirect) causality via and exclusive of a set of variables. We then provide necessary and sufficient causal and stochastic conditions for (conditional) dependence among random vectors of interest in settable systems. Immediate corollaries ensure the validity of Reichenbach's principle of common cause and its informative extension, the conditional Reichenbach principle of common cause. We relate our results to notions of d-separation and D-separation in the artificial intelligence literature. Keywords: causality, conditional independence, d-separation, Reichenbach principle, settable systems Classification-JEL: C10, C30, C31, C50 Series: Boston College Working Papers in Economics Number: 689 Creation-Date: 20080911 Revision-Date: 20100704 Note: Previously circulated as "Independence and Conditional Independence in Causal Systems" File-URL: http://fmwww.bc.edu/EC-P/wp689.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:689 Template-Type: ReDIF-Paper 1.0 Title: The Impact of Macroeconomic Uncertainty on Firms' Changes in Financial Leverage Author-Name: Christopher F. Baum Author-X-Name-First: Christopher Author-X-Name-Last: Baum Author-Person: pba1 Author-Email: baum@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Workplace-Name: DIW Berlin Author-Name: Atreya Chakraborty Author-X-Name-First: Atreya Author-X-Name-Last: Chakraborty Author-Person: pch70 Author-Workplace-Name: University of Massachusetts-Boston Author-Email: atreya.chakraborty@umb.edu Author-Name: Boyan Liu Author-X-Name-First: Boyan Author-X-Name-Last: Liu Abstract: We investigate the relationship between a firm's measures of corporate governance, macroeconomic uncertainty and changes in leverage. Recent research highlights the role of governance in financing decisions. Previous research also indicates that macroeconomic uncertainty affects a firm’s ability to borrow. In this paper we investigate how both these channels of influence affects firms' financing decisions. Our findings show that macroeconomic uncertainty has an important role to play, both by itself and in interaction with a measure of corporate governance. Keywords: macroeconomic uncertainty, corporate governance, leverage Classification-JEL: D81, G32, G34 Series: Boston College Working Papers in Economics Number: 688 Creation-Date: 20080818 Publication-Status: published, International Journal of Finance & Economics, 15:1, 22-30, 2010 Length: 19 pages File-URL: http://fmwww.bc.edu/EC-P/wp688.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:688 Template-Type: ReDIF-Paper 1.0 Title: The Talmud On Transitivity Author-Name: Shlomo Naeh Author-X-Name-First: Shlomo Author-X-Name-Last: Naeh Author-Workplace-Name: Hebrew University Author-Name: Uzi Segal Author-X-Name-First: Uzi Author-X-Name-Last: Segal Author-Person: pse40 Author-Email: uzi.segal@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Series: Boston College Working Papers in Economics Number: 687 Abstract: Transitivity is a fundamental axiom in Economics that appears in consumer theory, decision under uncertainty, and social choice theory. While the appeal of transitivity is obvious, observed choices sometimes contradict it. This paper shows that treatments of violations of transitivity al- ready appear in the rabbinic literature, starting with the Mishnah and the Talmud (1st–5th c CE). This literature offers several solutions that are similar to those used in the modern economic literature, as well as some other solutions that may be adopted in modern situations. We analyze several examples. One where nontransitive relations are acceptable; one where a violation of transitivity leads to problems with extended choice functions; and a third where a nontransitive cycle is deliberately created (to enhance justice). Creation-Date: 20080623 Revision-Date: 20090904 Length: 24 pages Classification-JEL: B21, K40 Keywords: transitivity, Talmud File-URL: http://fmwww.bc.edu/EC-P/wp687.pdf File-Format: application/pdf File-Size: 156 Kb File-Function: main text Handle: RePEc:boc:bocoec:687 Template-Type: ReDIF-Paper 1.0 Title: On the Investment Sensitivity of Debt under Uncertainty Author-Name: Christopher F. Baum Author-X-Name-First: Christopher Author-X-Name-Last: Baum Author-Person: pba1 Author-Email: baum@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Workplace-Name: DIW Berlin Author-Name: Mustafa Caglayan Author-X-Name-First: Mustafa Author-X-Name-Last: Caglayan Author-Person: pca30 Author-Workplace-Name: University of Sheffield Author-Name: Oleksandr Talavera Author-X-Name-First: Oleksandr Author-X-Name-Last: Talavera Author-Person: pta65 Author-Email: oleksandr.talavera@googlemail.com Author-Workplace-Name: School of Economics, University of East Anglia Abstract: We investigate the impact of debt on a panel of U.S. manufacturing firms' capital investment behavior as the underlying firm-specific and macroeconomic uncertainty changes. Our estimates show that the influence of leverage on capital investment may be stimulating or mitigating depending on the effects of uncertainty. Keywords: capital investment, leverage, uncertainty Classification-JEL: E22, G31, D81 Series: Boston College Working Papers in Economics Number: 686 Publication-Status: published, Economics Letters, 2010, 106:25-27 Creation-Date: 20080621 Length: 14 pages File-URL: http://fmwww.bc.edu/EC-P/wp686.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:686 Template-Type: ReDIF-Paper 1.0 Title: Global Free Trade is in the Core of a Customs Union Game Author-Name: Hideo Konishi Author-X-Name-First: Hideo Author-X-Name-Last: Konishi Author-Person: pko35 Author-Email: konishih@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Carsten Kowalczyk Author-Workplace-Name: Fletcher School, Tufts University Author-Name: Tomas Sjöström Author-Workplace-Name: Rutgers University Series: Boston College Working Papers in Economics Number: 685 Abstract: This paper shows nonemptiness of the core of a customs union game with a status quo equilibrium with tariffs by employing an appropriate notion of the core as in Kowalczyk and Sjöström (1994, Economica). Specifically, we find that if customs unions may have no effects on non-member countries as in Ohyama (1972, Keio Economic Studies) and Kemp and Wan (1976, Journal of International Economics) then a subset of countries forming such a customs union does not block global free trade when accompanied by so-called Grinols transfers (Grinols, 1981, Journal of International Economics). Classification-JEL: F11, F13 Keywords: customs unions, game theory, free trade Publication-Status: published, Review of International Economics 17, 304-309, 2009, (special issue in memory of Koji Shimomura Creation-Date: 20080619 File-URL: http://fmwww.bc.edu/EC-P/wp685.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:685 Template-Type: ReDIF-Paper 1.0 Title: Self-Employment Transitions among Older American Workers with Career Jobs Author-Name: Michael D. Giandrea Author-X-Name-First: Michael Author-X-Name-Last: Giandrea Author-Email: giandrea.michael@bls.gov Author-Workplace-Name: U.S. Bureau of Labor Statistics Author-Name: Kevin E. Cahill Author-X-Name-First: Kevin Author-X-Name-Last: Cahill Author-Email: kcahill@analysisgroup.com Author-Workplace-Name: Analysis Group, Inc. Author-Name: Joseph F. Quinn Author-Email: quinnj@bc.edu Author-Person: pqu7 Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: What role does self-employment play in the retirement process? Older Americans are staying in the labor force longer than prior trends would have predicted and many change jobs later in life. These job transitions are often within the same occupation or across occupations within wage- and-salary employment. The transition can also be out of wage-and-salary work and into self employment. Indeed, national statistics show that self employment becomes more prevalent with age, partly because self employment provides older workers with opportunities not found in traditional wage-and-salary jobs, such as flexibility in hours worked and independence. This paper analyzes transitions into and out of self employment among older workers who have had career jobs. We utilize the Health and Retirement Study, a nationally-representative dataset of older Americans, to investigate the prevalence of self employment among older workers who made a job transition later in life and to explore the factors that determine the choice of wage- and-salary employment or self employment. We find that post-career transitions into and out of self employment are common and that health status, career occupation, and financial variables are important determinants of these transitions. As older Americans and the country as a whole face financial strains in retirement income in the years ahead, self employment may be a vital part of the pro-work solution. Series: Boston College Working Papers in Economics Number: 684 Creation-Date: 20080410 Length: 37 pages Keywords:   Classification-JEL:   File-URL: http://fmwww.bc.edu/EC-P/wp684.pdf File-Format: application/pdf File-Size: 121 Kb File-Function: main text Handle: RePEc:boc:bocoec:684 Template-Type: ReDIF-Paper 1.0 Title: Calibration Results for Incomplete Preferences Author-Name: Zvi Safra Author-X-Name-First: Zvi Author-X-Name-Last: Safra Author-Workplace-Name: Tel Aviv University Author-Name: Uzi Segal Author-X-Name-First: Uzi Author-X-Name-Last: Segal Author-Person: pse40 Author-Email: uzi.segal@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Series: Boston College Working Papers in Economics Number: 683 Abstract: A reasonable level of risk aversion with respect to small gambles leads to a high, and absurd, level of risk aversion with respect to large gambles. This was demonstrated by Rabin for expected utility theory. Later, Safra and Segal extended this result by showing that similar arguments apply to almost all non-expected utility theories, provided they are Gateaux differentiable. In this paper we drop the differentiability assumption and by restricting attention to betweenness theories we show that much weaker conditions are sufficient for the derivation of similar calibration results. Creation-Date: 20080518 Classification-JEL: D81 Keywords: risk aversion, betweenness Publication-Status: forthcoming, Revue Economique Note: formerly circulated as "Calibration Results for Betweenness Functionals" File-URL: http://fmwww.bc.edu/EC-P/wp683.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:683 Template-Type: ReDIF-Paper 1.0 Title: Calibration Results for Non-Expected Utility Theories Author-Name: Zvi Safra Author-X-Name-First: Zvi Author-X-Name-Last: Safra Author-Workplace-Name: Tel Aviv University Author-Name: Uzi Segal Author-X-Name-First: Uzi Author-X-Name-Last: Segal Author-Person: pse40 Author-Email: uzi.segal@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Series: Boston College Working Papers in Economics Number: 682 Abstract: Rabin proved that a low level of risk aversion with respect to small gambles leads to a high, and absurd, level of risk aversion with respect to large gambles. Rabin’s arguments strongly depend on expected utility theory, but we show that similar arguments apply to general non-expected utility theories. Creation-Date: 20080518 Publication-Status: published, Econometrica, 76:5, 1143-1166, 2008. Classification-JEL: Keywords: risk aversion, betweenness, calibration, non-expected utility theories File-URL: http://fmwww.bc.edu/EC-P/wp682.pdf File-Format: application/pdf File-Size: 216 Kb File-Function: main text Handle: RePEc:boc:bocoec:682 Template-Type: ReDIF-Paper 1.0 Title: Contributing or Free-Riding?  Voluntary Participation in a Public Good Economy Author-Name: Taiji Furusawa Author-X-Name-First: Taiji Author-X-Name-Last: Furusawa Author-Workplace-Name: Hitotsubashi University Author-Name: Hideo Konishi Author-X-Name-First: Hideo Author-X-Name-Last: Konishi Author-Person: pko35 Author-Email: konishih@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Series: Boston College Working Papers in Economics Number: 681 Abstract: We consider a (pure) public goods provision problem with voluntary participation in a quasi-linear economy. We propose a new hybrid solution concept, the free-riding-proof core (FRP-Core), which endogenously determine a contribution group, public good provision level, and its cost-sharing. The definition of the FRP-Core is based on credibility of coalitional deviations. The FRP-Core is always nonempty in public good economy but does not usually achieve global efficiency. The FRP-Core has support from both cooperative and noncooperative games. In particular, it is equivalent to the set of perfectly coalition-proof Nash equilibrium (Bernheim, Peleg and Whinston, 1987 JET) of a dynamic game with participation decision followed by a common agency game. We illustrate the properties of the FRP-Core with an example. We also show that the equilibrium level of public good shrinks to zero as the economy is replicated. Classification-JEL: C71, C72, F13, H41 Keywords: endogenous coalition formation, externalities, public good, perfectly coalition-proof Nash equilibrium, free riders, free-riding-proof core, lobbying, common agency game Note: Previously circulated as "Contributing or Free-Riding?  A Theory of Endogenous Lobby Formation" Creation-Date: 20080211 Revision-Date: 20100804 Publication-Status: published, Theoretical Economics 6, 219-256, 2011. File-URL: http://fmwww.bc.edu/EC-P/wp681.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:681 Template-Type: ReDIF-Paper 1.0 Title: Local Indirect Least Squares and Average Marginal Effects in Nonseparable Structural Systems Author-Name: Susanne Schennach Author-X-Name-First: Susanne Author-X-Name-Last: Schennach Author-WorkPlace-Name: University of Chicago Author-Name: Halbert White Author-X-Name-First: Halbert Author-X-Name-Last: White Author-Person: pwh17 Author-Name: Karim Chalak Author-X-Name-First: Karim Author-X-Name-Last: Chalak Author-Email: chalak@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Person: pch561 Abstract: We study the scope of local indirect least squares (LILS) methods for nonparametrically estimating average marginal effects of an endogenous cause X on a response Y in triangular structural systems that need not exhibit linearity, separability, or monotonicity in scalar unobservables. One main finding is negative: in the fully nonseparable case, LILS methods cannot recover the average marginal effect. LILS methods can nevertheless test the hypothesis of no effect in the general nonseparable case. We provide new nonparametric asymptotic theory, treating both the traditional case of observed exogenous instruments Z and the case where one observes only error-laden proxies for Z. Classification-JEL: C13, C14, C31 Keywords: indirect least squares, instrumental variables, measurement error, nonparametric estimator, nonseparable structural equations Series: Boston College Working Papers in Economics Number: 680 Note: Previously circulated as "Estimating average marginal effects in nonseparable structural systems" Creation-Date: 20071203 Revision-Date: 20091226 File-URL: http://fmwww.bc.edu/EC-P/wp680.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:680 Template-Type: ReDIF-Paper 1.0 Title: Explorations into the Production of State Government Services: Education, Welfare and Hospitals Author-Name: Richard W. Tresch Author-X-Name-First: Richard Author-X-Name-Last: Tresch Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Andrei Zlate Author-X-Name-First: Andrei Author-X-Name-Last: Zlate Author-Person: pzl2 Author-Email: zlate@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: This paper explores the production characteristics of three important U.S. state government services--public higher education, public welfare, and state psychiatric hospitals—during the last half of the twentieth century. We estimate translog cost functions for the three services and find that their production attributes are similar in a number of respects. First, production exhibits substantial economies of scale; unexploited scale economies are so severe that the average state operates on the negative portion of its marginal cost curve. Second, the analysis of technical change indicates that public education, welfare, and hospitals are affected by severe technical regression in all states, in both the long run and short run. Third, production of all three services is overcapitalized in most states; the provision of these services is not long-run efficient. Finally, we show that the Baumol-Oates cost disease of lagging productivity growth is rampant in all three services; only the short-run productivity growth in education matches the performance of the private sector, as technical regression is more than offset by the productivity-enhancing scale effect of increased enrollments. Keywords: public services, translog cost function, scale economies, technical regression, long-run cost efficiency, technology growth Classification-JEL: D24, H41, H75, I18, I22, I38 Series: Boston College Working Papers in Economics Number: 679 Creation-Date: 20071128 Length: 74 pages File-URL: http://fmwww.bc.edu/EC-P/wp679.pdf File-Format: application/pdf File-Size: 3 Mb File-Function: main text Handle: RePEc:boc:bocoec:679 Template-Type: ReDIF-Paper 1.0 Title: Returns to Lying? Identifying the Effects of Misreporting When the Truth is Unobserved Author-Name: Yingyao Hu Author-X-Name-First: Yingyao Author-X-Name-Last: Hu Author-Workplace-Name: Johns Hopkins University Author-Name: Arthur Lewbel Author-X-Name-First:Arthur Author-X-Name-Last: Lewbel Author-Person: ple43 Author-Email: lewbel@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: Consider an observed binary regressor D and an unobserved binary variable D*, both of which affect some other variable Y. This paper considers nonparametric identification and estimation of the effect of D on Y, conditioning on D*=0. For example, suppose Y is a person's wage, the unobserved D* indicates if the person has been to college, and the observed D indicates whether the individual claims to have been to college. This paper then identifies and estimates the difference in average wages between those who falsely claim college experience versus those who tell the truth about not having college. We estimate this average effect of lying to be about 6% to 20%. Nonparametric identification without observing D* is obtained either by observing a variable V that is roughly analogous to an instrument for ordinary measurement error, or by imposing restrictions on model error moments. Keywords: Binary regressor, misclassification, measurement error, unobserved factor, discrete factor, program evaluation, treatment effects, returns to schooling, wage model. Classification-JEL: C14, C13, C20, I2 Series: Boston College Working Papers in Economics Number: 678 Creation-Date: 20071128 Revision-Date: 20090616 Note: previously titled "Identifying the Returns to Lying When the Truth is Unobserved" Length: 35 pages File-URL: http://fmwww.bc.edu/EC-P/wp678.pdf File-Format: application/pdf File-Size: 205 Kb File-Function: main text Handle: RePEc:boc:bocoec:678 Template-Type: ReDIF-Paper 1.0 Title: The Unilateral Incentives for Technology Transfers: Predation by Proxy (and Deterrence) Author-Name: Anthony Creane Author-Workplace-Name: Michigan State University Author-Name: Hideo Konishi Author-X-Name-First: Hideo Author-X-Name-Last: Konishi Author-Person: pko35 Author-Email: konishih@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Series: Boston College Working Papers in Economics Number: 677 Abstract: Joint production between rival firms often entails knowledge transfers without direct compensation, leaving the question as to why more efficient firms would give their rivals such an advantage.  We find that such transfers are credible mechanisms to make the market more competitive so as to deter entry or force exit.  We determine that with free entry such transfers are profitable and further it is optimal to predate or deter every firm possible so that a market with many firms can become a duopoly.  While consumers are harmed by such action, production efficiency increases sufficient to cause welfare to increase.  Note: Previously circulated as "The Unilateral Incentives for Technology Transfers: Predation by Proxy" Classification-JEL: D4, L1, L41 Keywords: Predation, Technology Transfers Creation-Date: 20070929 Revision-Date: 20080619 Publication-Status: published, International Journal of Industrial Organization 27, 379-389, 2009 File-URL: http://fmwww.bc.edu/EC-P/wp677.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:677 Template-Type: ReDIF-Paper 1.0 Title: Nonparametric Identification and Estimation of Nonclassical Errors-in-Variables Models Without Additional Information Author-Name: Xiaohong Chen Author-X-Name-First: Xiaohong Author-X-Name-Last: Chen Author-Workplace-Name: Yale University Author-Name: Yingyao Hu Author-X-Name-First: Yingyao Author-X-Name-Last: Hu Author-Workplace-Name: Johns Hopkins University Author-Name: Arthur Lewbel Author-X-Name-First:Arthur Author-X-Name-Last: Lewbel Author-Person: ple43 Author-Email: lewbel@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: This paper considers identification and estimation of a nonparametric regression model with an unobserved discrete covariate. The sample consists of a dependent variable and a set of covariates, one of which is discrete and arbitrarily correlates with the unobserved covariate. The observed discrete covariate has the same support as the unobserved covariate, and can be interpreted as a proxy or mismeasure of the unobserved one, but with a nonclassical measurement error that has an unknown distribution. We obtain nonparametric identification of the model given monotonicity of the regression function and a rank condition that is directly testable given the data. Our identification strategy does not require additional sample information, such as instrumental variables or a secondary sample. We then estimate the model via the method of sieve maximum likelihood, and provide root-n asymptotic normality and semiparametric efficiency of smooth functionals of interest. Two small simulations are presented to illustrate the identification and the estimation results. Keywords: Errors-In-Variables (EIV), Identification; Nonclassical measurement error; Nonparametric regression; Sieve maximum likelihood. Classification-JEL: C20, C14 Series: Boston College Working Papers in Economics Number: 676 Creation-Date: 20070808 Length: 44 pages File-URL: http://fmwww.bc.edu/EC-P/wp676.pdf File-Format: application/pdf File-Size: 275 Kb File-Function: main text Handle: RePEc:boc:bocoec:676 Template-Type: ReDIF-Paper 1.0 Title: Nonparametric Identification of Regression Models Containing a Misclassified Dichotomous Regressor Without Instruments Author-Name: Xiaohong Chen Author-X-Name-First: Xiaohong Author-X-Name-Last: Chen Author-Workplace-Name: Yale University Author-Name: Yingyao Hu Author-X-Name-First: Yingyao Author-X-Name-Last: Hu Author-Workplace-Name: Johns Hopkins University Author-Name: Arthur Lewbel Author-X-Name-First:Arthur Author-X-Name-Last: Lewbel Author-Person: ple43 Author-Email: lewbel@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: This note considers nonparametric identification of a general nonlinear regression model with a dichotomous regressor subject to misclassification error. The available sample information consists of a dependent variable and a set of regressors, one of which is binary and error-ridden with misclassification error that has unknown distribution. Our identification strategy does not parameterize any regression or distribution functions, and does not require additional sample information such as instrumental variables, repeated measurements, or an auxiliary sample. Our main identifying assumption is that the regression model error has zero conditional third moment. The results include a closed-form solution for the unknown distributions and the regression function. Keywords: misclassification error; identification; nonparametric regression Classification-JEL: C20, C14 Series: Boston College Working Papers in Economics Number: 675 Creation-Date: 20070731 Length: 15 pages File-URL: http://fmwww.bc.edu/EC-P/wp675.pdf File-Format: application/pdf File-Size: 132 Kb File-Function: main text Handle: RePEc:boc:bocoec:675 Template-Type: ReDIF-Paper 1.0 Title: Nonparametric identification of the classical errors-in-variables model without side information Author-Name: Susanne M. Schennach Author-X-Name-First: Susanne Author-X-Name-Last: Schennach Author-Workplace-Name: University of Chicago Author-Name: Yingyao Hu Author-X-Name-First: Yingyao Author-X-Name-Last: Hu Author-Workplace-Name: Johns Hopkins University Author-Name: Arthur Lewbel Author-X-Name-First:Arthur Author-X-Name-Last: Lewbel Author-Person: ple43 Author-Email: lewbel@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: This note establishes that the fully nonparametric classical errors-in-variables model is identifiable from data on the regressor and the dependent variable alone, unless the specification is a member of a very specific parametric family. This family includes the linear specification with normally distributed variables as a special case. This result relies on standard primitive regularity conditions taking the form of smoothness and monotonicity of the regression function and nonvanishing characteristic functions of the disturbances. Keywords: errors in variables, nonparametric estimation, identification Classification-JEL: C20, C14 Series: Boston College Working Papers in Economics Number: 674 Creation-Date: 20070716 Length: 21 pages File-URL: http://fmwww.bc.edu/EC-P/wp674.pdf File-Format: application/pdf File-Size: 277 Kb File-Function: main text Handle: RePEc:boc:bocoec:674 Template-Type: ReDIF-Paper 1.0 Title: Economic Integration and the Civilizing Commerce Hypothesis Author-Name: James E. Anderson Author-X-Name-First: James Author-X-Name-Last: Anderson Author-Person: pan2 Author-Email: anderson@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: Economic integration lowers one form of trade costs, tariffs, and stimulates changes in other trade costs. This paper offers a model in which integration may raise or lower the important trade cost associated with insecurity. The model can help to explain the varied experience with integration and it points to the usefulness of combining enforcement policy integration with trade policy integration. Series: Boston College Working Papers in Economics Number: 673 Creation-Date: 20050901 Length: 23 pages Keywords: economic integration, trade costs, tariffs, trade policy Classification-JEL: F10 Publication-Status: published, World Economy, 31, 141-157, 2008 File-URL: http://fmwww.bc.edu/EC-P/wp673.pdf File-Format: application/pdf File-Size: 189 Kb File-Function: main text Handle: RePEc:boc:bocoec:673 Template-Type: ReDIF-Paper 1.0 Title: Does Trade Foster Contract Enforcement? Author-Name: James E. Anderson Author-X-Name-First: James Author-X-Name-Last: Anderson Author-Person: pan2 Author-Email: anderson@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Workplace-Name: NBER Abstract: Contract enforcement is probabilistic, but the probability depends on rules and processes. A stimulus to trade may induce traders to alter rules or processes to improve enforcement. In the model of this paper, such a positive knock-on effect occurs when the elasticity of supply of traders is sufficiently high. Negative knock-on is possible when the elasticity is low. Enforcement strategies in competing markets are complements (substitutes) if the supply of traders is sufficiently elastic (inelastic). The model provides a useful structure of endogenous enforcement that gives promise of explaining patterns of institutional development. Series: Boston College Working Papers in Economics Number: 672 Creation-Date: 20070721 Length: 28 pages Keywords: trade, contract enforcement, institutional development Classification-JEL: F10, O17, K42. Publication-Status: published, Economic Theory, 41, 105-131, 2009 File-URL: http://fmwww.bc.edu/EC-P/wp672.pdf File-Format: application/pdf File-Size: 261 Kb File-Function: main text Handle: RePEc:boc:bocoec:672 Template-Type: ReDIF-Paper 1.0 Title: Why is Consumption More Log Normal Than Income? Gibrat's Law Revisited Author-Name: Erich Battistin Author-X-Name-First: Erich Author-X-Name-Last: Battistin Author-Workplace-Name: University of Padova Author-Workplace-Name: Institute for Fiscal Studies Author-Name: Richard Blundell Author-X-Name-First: Richard Author-X-Name-Last: Blundell Author-Workplace-Name: University College London Author-Workplace-Name: Institute for Fiscal Studies Author-Name: Arthur Lewbel Author-X-Name-First:Arthur Author-X-Name-Last: Lewbel Author-Person: ple43 Author-Email: lewbel@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: Significant departures from log normality are observed in income data, in violation of Gibrat's law. We identify a new empirical regularity, which is that the distribution of consumption expenditures across households is, within cohorts, closer to log normal than the distribution of income. We explain these empirical results by showing that the logic of Gibrat's law applies not to total income, but to permanent income and to maginal utility. These findings have important implications for welfare and inequality measurement, aggregation, and econometric model analysis. Keywords: Consumption, Income, Lognormal, Inequality, Gibrat. Classification-JEL: D3, D12, D91 Series: Boston College Working Papers in Economics Number: 671 Creation-Date: 20070706 Length: 36 pages File-URL: http://fmwww.bc.edu/EC-P/wp671.pdf File-Format: application/pdf File-Size: 577 Kb File-Function: main text Handle: RePEc:boc:bocoec:671 Template-Type: ReDIF-Paper 1.0 Title: Bridge Jobs: A Comparison across Cohorts Author-Name: Michael D. Giandrea Author-X-Name-First: Michael Author-X-Name-Last: Giandrea Author-Email: giandrea.michael@bls.gov Author-Workplace-Name: U.S. Bureau of Labor Statistics Author-Name: Kevin E. Cahill Author-X-Name-First: Kevin Author-X-Name-Last: Cahill Author-Email: kcahill@analysisgroup.com Author-Workplace-Name: Analysis Group, Inc. Author-Name: Joseph F. Quinn Author-Email: quinnj@bc.edu Author-Person: pqu7 Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: Are today's youngest retirees following in the footsteps of their older peers with respect to gradual retirement? Recent evidence from the Health and Retirement Study (HRS) suggests that most older Americans with full-time career jobs later in life transitioned to another job prior to complete labor force withdrawal. This paper explores the retirement patterns of a younger cohort of individuals from the HRS known as the "War Babies." These survey respondents were born between 1942 and 1947 and were 57 to 62 years of age at the time of their fourth bi-annual HRS interview in 2004. We compare the War Babies to an older cohort of HRS respondents and find that, for the most part, the War Babies have followed the gradual-retirement trends of their slightly older predecessors. Traditional one-time, permanent retirements appear to be fading, a sign that the impact of changes in the retirement income landscape since the 1980s continues to unfold. Series: Boston College Working Papers in Economics Number: 670 Creation-Date: 20070530 Revision-Date: 20081222 Length: 37 pages Note: Previously circulated as "An Update on Bridge Jobs: the HRS War Babies" Keywords:  Economics of Aging, Partial Retirement, Gradual Retirement Classification-JEL:   J26, J14, J32, H55 File-URL: http://fmwww.bc.edu/EC-P/wp670.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:670 Template-Type: ReDIF-Paper 1.0 Title: Shape Invariant Demand Functions Author-Name: Arthur Lewbel Author-X-Name-First:Arthur Author-X-Name-Last: Lewbel Author-Person: ple43 Author-Email: lewbel@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: Shape invariance is a property of demand functions that is convenient for semiparametric demand modelling. All known shape invariant demands are derived from utility functions that, up to monotonic transformation, are called IB/ESE (independent of base - equivalence scale exact) utility functions, because they yield IB/ESE equivalence scales, which are widely used in welfare calculations. This paper provides a counterexample, i.e., a shape invariant demand system that is not derived from a transform of IB/ESE utility. A general theorem is then provided that characterizes all shape invariant demand systems. The usual practice of equating shape invariance with the IB/ESE utility class is shown to be not quite right, but it can be made valid by testing for the small class of exceptions noted here. In particular, all the exceptions have rank two, so any rank three or higher shape invariant system must be derived from transforms of IB/ESE utility. Keywords: Shape Invariance, Equivalence Scales, Engel curves, Consumer demand, Demand Systems, Utility, Cost Functions. Classification-JEL: D11, D12, C31, C51 Series: Boston College Working Papers in Economics Number: 669 Creation-Date: 20070613 Revision-Date: 20081126 Length: 18 pages File-URL: http://fmwww.bc.edu/EC-P/wp669.pdf File-Format: application/pdf File-Size: 150 Kb File-Function: main text Handle: RePEc:boc:bocoec:669 Template-Type: ReDIF-Paper 1.0 Title: Regressor Dimension Reduction with Economic Constraints: The Example of Demand Systems with Many Goods Author-Name: Stefan Hoderlein Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Person: pho119 Author-Name: Arthur Lewbel Author-X-Name-First:Arthur Author-X-Name-Last: Lewbel Author-Person: ple43 Author-Email: lewbel@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: Microeconomic theory often yields models with multiple nonlinear equations, nonseparable unobservables, nonlinear cross equation restrictions, and many potentially multicollinear covariates. We show how statistical dimension reduction techniques can be applied in models with these features. In particular, we consider estimation of derivatives of average structural functions in large consumer demand systems, which depend nonlinearly on the prices of many goods. Utility maximization imposes nonlinear cross equation constraints including Slutsky symmetry, and preference heterogeneity yields de- mand functions that are nonseparable in unobservables. The standard method of achieving dimension reduction in demand systems is to impose strong, empirically questionable economic restrictions like separability. In contrast, the validity of statistical methods of dimension reduction like principal components have not hitherto been studied in contexts like these. We derive the restrictions implied by utility maximization on dimension reduced de- mand systems, and characterize the implications for identification and estimation of structural marginal effects. We illustrate the results by reporting estimates of the effects of gasoline prices on the demands for many goods, without imposing any economic separability assumptions. Keywords: Demand System, Dimension Reduction, Marshallian demands, Separability, Testing Rationality, Nonparametric, Gasoline prices. Classification-JEL: D12, C30, C43, C14 Series: Boston College Working Papers in Economics Number: 668 Creation-Date: 20070613 Revision-Date: 20110223 File-URL: http://fmwww.bc.edu/EC-P/wp668.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:668 Template-Type: ReDIF-Paper 1.0 Title: Enhanced routines for instrumental variables/GMM estimation and testing Author-Name: Christopher F Baum Author-X-Name-First: Christopher Author-X-Name-Last: Baum Author-Person: pba1 Author-Email: baum@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Mark E. Schaffer Author-X-Name-First: Mark Author-X-Name-Last: Schaffer Author-Email: M.E.Schaffer@hw.ac.uk Author-Workplace-Name: Heriot-Watt University Author-Person: psc51 Author-Name: Steven Stillman Author-X-Name-First: Steven Author-X-Name-Last: Stillman Author-Email: stillman@motu.org.nz Author-Workplace-Name: Motu Economic and Public Policy Research Author-Person: pst124 Abstract: We extend our 2003 paper on instrumental variables (IV) and GMM estimation and testing and describe enhanced routines that address HAC standard errors, weak instruments, LIML and k-class estimation, tests for endogeneity and RESET and autocorrelation tests for IV estimates. Keywords: instrumental variables, generalized method of moments, endogeneity, heteroskedasticity, autocorrelation, weak instruments, overidentifying restrictions Series: Boston College Working Papers in Economics Number: 667 Classification-JEL: C20, C22, C23, C12, C13, C87 Creation-Date: 20070509 Revision-Date: 20070905 Publication-Status: published, Stata Journal, 7:4, 465-506, 2007 File-URL: http://fmwww.bc.edu/EC-P/wp667.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:667 Template-Type: ReDIF-Paper 1.0 Title: Occupational Choice and the Quality of Entrepreneurs Author-Name: Eren Inci Author-X-Name-First: Eren Author-X-Name-Last: Inci Author-Person: pin10 Author-Email: inci@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: This paper focuses on the quality of entrepreneurs when individuals, who differ in terms of entrepreneurial ability and wealth, choose between entrepreneurship and wage-earning. A loan is required to become an entrepreneur. Four wealth classes form endogenously. Banks' inability to identify the ability of individuals leads them to offer pooling contracts to the poor and the lower-middle classes. Regardless of ability, all poor class individuals become workers and all lower-middle class individuals become entrepreneurs. Banks are able to offer separating contracts to the upper-middle and the rich classes. High-ability individuals in these wealth classes become entrepreneurs and their low-ability counterparts become workers. Equilibrium contracts may entail cross-subsidies within or between occupations. In some economies, a small success tax on entrepreneurs used to subsidize workers can increase the average quality of entrepreneurs and welfare by changing the thresholds of the wealth classes. In some others a reverse policy is required. Since the aggregate level of investment is fixed, the reason for these policies is not under- or overinvestment by entrepreneurs, as it often is in previous literature. Keywords: adverse selection; entrepreneurship; general equilibrium contract theory; moral hazard; occupational choice; success tax; wage subsidy Classification-JEL: D43; D82; H25; L26 Series: Boston College Working Papers in Economics Number: 666 Creation-Date: 20070502 Length: 42 pages File-URL: http://fmwww.bc.edu/EC-P/wp666.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:666 Template-Type: ReDIF-Paper 1.0 Title: Downtown Parking in Auto City Author-Name: Richard Arnott Author-X-Name-First: Richard Author-X-Name-Last: Arnott Author-Person: par13 Author-Email: arnottr@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: John Rowse Author-X-Name-First: John Author-X-Name-Last: Rowse Author-Workplace-Name: University of Calgary Series: Boston College Working Papers in Economics Number: 665 Abstract: This paper develops and calibrates a model of downtown parking in a city without mass transit, and applies it to investigate downtown parking policy. There is curbside and garage parking and traffic congestion. Spatial competition between private parking garages determines the equilibrium garage parking fee and spacing between parking garages. Curbside parking is priced below its social opportunity cost. Cruising for parking adjusts to equalize the full prices of on- and off-street parking, and contributes to traffic congestion. The central result is that raising curbside parking fees appears to be a very attractive policy since it generates efficiency gains that may be several times as large as the increased revenues raised. Keywords: parking, traffic congestion, parking garages, parking policy Classification-JEL: R40 Creation-Date: 20070430 Length: 33 pages File-URL: http://fmwww.bc.edu/EC-P/wp660.pdf File-Format: application/pdf File-Size: 254 Kb File-Function: main text Handle: RePEc:boc:bocoec:665 Template-Type: ReDIF-Paper 1.0 Title: Corporate Board Turnover and Securities Fraud Litigation: Some new evidence from case outcomes Author-Name: Christopher F. Baum Author-X-Name-First: Christopher Author-X-Name-Last: Baum Author-Person: pba1 Author-Email: baum@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Workplace-Name: DIW Berlin Author-Name: James G. Bohn Author-X-Name-First: James Author-X-Name-Last: Bohn Author-Workplace-Name: Federal Reserve Bank of Boston Author-Name: Atreya Chakraborty Author-X-Name-First: Atreya Author-X-Name-Last: Chakraborty Author-Person: pch70 Author-Workplace-Name: University of Massachusetts-Boston Author-Email: atreya.chakraborty@umb.edu Abstract: We examine the relationship between outcomes of securities fraud class action lawsuits (SFCAs) and corporate board turnover rates. Our results indicate the strength of the allegations in lawsuits affects board turnover. The turnover rates for each type of board member: outsiders, insiders, and CEOs are higher when a lawsuit is settled relative to those that are dismissed. Turnover rates of outside directors are more sensitive to the outcome of the SFCA among firms with higher levels of external blockholdings and those with greater institutional ownership. These results support the view that firms act to impose sanctions on those individuals associated with fraudulent activities. Keywords: Securities fraud class actions, board turnover, corporate governance Classification-JEL: G32, K22 Series: Boston College Working Papers in Economics Number: 664 Publication-Status: published 2016, International Review of Law and Economics, 48, 14-25 Creation-Date: 20070428 Revision-Date: 20160531 File-URL: http://fmwww.bc.edu/EC-P/wp664.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:664 Template-Type: ReDIF-Paper 1.0 Title: Employment Outcomes and the Interaction Between Product and Labor Market Deregulation: Are They Substitutes or Complements? Author-Name: Giuseppe Fiori Author-X-Name-First: Giuseppe Author-X-Name-Last: Fiori Author-Email: fiori@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Giuseppe Nicoletti Author-X-Name-First: Guiseppe Author-X-Name-Last: Nicoletti Author-WorkPlace-Name: OECD Author-Name: Stefano Scarpetta Author-X-Name-First: Stefano Author-X-Name-Last: Scarpetta Author-WorkPlace-Name: OECD Author-Workplace-Name: IZA Author-Name: Fabio Schiantarelli Author-X-Name-First: Fabio Author-X-Name-Last: Schiantarelli Author-Email: schianta@bc.edu Author-Person: psc8 Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Workplace-Name: IZA Abstract: This paper provides a systematic empirical investigation of the effect of product market liberalization on employment when there are interactions between policies and institutions in product and labor markets. Using panel data for OECD countries over the period 1980-2002, we present evidence that product market deregulation is more effective at the margin when labor market regulation is high. Moreover, there is evidence in our sample that product market deregulation promotes labor market deregulation. We show that these results are mostly consistent with the basic predictions of a standard bargaining model (e.g. Blanchard and Giavazzi (2003)), once one allows for a full specification of the fall back position of the unions. Series: Boston College Working Papers in Economics Number: 663 Creation-Date: 20070423 Revision-Date: 20080808 Length: 43 pages Keywords: Employment, Competition, Deregulation, Liberalization, Unions Classification-JEL: J23, J50, L50 File-URL: http://fmwww.bc.edu/EC-P/wp663.pdf File-Format: application/pdf File-Size: 310 Kb File-Function: main text Handle: RePEc:boc:bocoec:663 Template-Type: ReDIF-Paper 1.0 Title: On the Welfare Cost of Inflation and the Recent Behavior of Money Demand Author-Name: Peter N. Ireland Author-X-Name-First: Peter Author-X-Name-Last: Ireland Author-Person: pir1 Author-Email: peter.ireland@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: Post-1980 U.S. data trace out a stable long-run money demand relationship of Cagan's semi-log form between the M1-income ratio and the nominal interest rate, with an interest semi-elasticity of 1.79. Integrating under this money demand curve yields estimates of the welfare cost of modest departures from Friedman's zero nominal interest rate rule for the optimum quantity of money that are quite small. The results suggest that the Federal Reserve's current policy, which generates low but still positive rates of inflation, provides an adequate approximation in welfare terms to the alternative of moving all the way to the Friedman rule. Classification-JEL: E31, E41, E52 Keywords: inflation, welfare cost, money demand, Friedman rule Publication-Status: published, American Economic Review, June 2009 Series: Boston College Working Papers in Economics Number: 662 Creation-Date: 20070420 Length: 19 pages File-URL: http://fmwww.bc.edu/EC-P/wp662.pdf File-Format: application/pdf File-Size: 256 Kb File-Function: main text Handle: RePEc:boc:bocoec:662 Template-Type: ReDIF-Paper 1.0 Title: Tenancy Rent Control and Credible Commitment in Maintenance Author-Name: Richard Arnott Author-X-Name-First: Richard Author-X-Name-Last: Arnott Author-Person: par13 Author-Email: arnottr@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Elizaveta Shevyakhova Author-X-Name-First: Elizaveta Author-X-Name-Last: Shevyakhova Series: Boston College Working Papers in Economics Number: 661 Abstract: Under tenancy rent control, rents are regulated within a tenancy but not between tenancies. This paper investigates the effects of tenancy rent control on housing quality, maintenance, and rehabilitation. Since the discounted revenue received over a fixed-duration tenancy depends only on the starting rent, intuitively the landlord has an incentive to spruce up the unit between tenancies in order to 'show' it well, but little incentive to maintain the unit well during the tenancy. The paper formalizes this intuition, and presents numerical examples illustrating the efficiency loss from this effect. Keywords: tenancy rent control, rent control, maintenance, housing quality, rehabilitation, credible commitment Classification-JEL: R21, R38 Creation-Date: 20070418 Length: 34 pages File-URL: http://fmwww.bc.edu/EC-P/wp660.pdf File-Format: application/pdf File-Size: 612 Kb File-Function: main text Handle: RePEc:boc:bocoec:661 Template-Type: ReDIF-Paper 1.0 Title: Congestion Tolling with Agglomeration Externalities Author-Name: Richard Arnott Author-X-Name-First: Richard Author-X-Name-Last: Arnott Author-Person: par13 Author-Email: arnottr@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Series: Boston College Working Papers in Economics Number: 660 Abstract: Consider an urban economy with two types of externalities, negative traffic congestion externalities and positive agglomeration externalities deriving from non-market interaction. Suppose that urban travel can be tolled, that non-market interaction cannot be subsidized, and that non-market interaction is stimulated by a reduction in travel costs. Then the optimal toll is below the congestion externality cost. This paper explores this line of reasoning. Keywords: congestion, congestion toll, agglomeration, externalities Classification-JEL: D60, H20, R40 Creation-Date: 20070326 Length: 34 pages File-URL: http://fmwww.bc.edu/EC-P/wp660.pdf File-Format: application/pdf File-Size: 244 Kb File-Function: main text Handle: RePEc:boc:bocoec:660 Template-Type: ReDIF-Paper 1.0 Title: Housing Market Spillovers: Evidence from an Estimated DSGE Model Author-Name: Matteo Iacoviello Author-X-Name-First: Matteo Author-X-Name-Last: Iacoviello Author-Email: matteo.iacoviello@bc.edu Author-Person: pia2 Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Stefano Neri Author-X-Name-First: Stefano Author-X-Name-Last: Neri Author-WorkPlace-Name: Banca D'Italia Abstract: Using U.S. data and Bayesian methods, we quantify the contribution of the housing market to business fluctuations. The estimated model, which contains nominal and real rigidities and collateral constraints, is used to address two questions. First, what shocks drive the housing market? We find that the upward trend in real housing prices of the last 40 years can be explained by slow technological progress in the housing sector. Over the business cycle instead, housing demand and housing technology shocks account for roughly one-quarter each of the volatility of housing investment and housing prices. Monetary factors account for about 20 percent, but they played a major role in the housing market cycle at the turn of the century. Second, do fluctuations in the housing market propagate to other forms of expenditure? We find that the spillovers from the housing market to the broader economy are non-negligible, concentrated on consumption rather than business investment, and they have become more important over time, to the extent that financial innovation has increased the marginal availability of funds for credit-constrained agents. Series: Boston College Working Papers in Economics Number: 659 Creation-Date: 20070325 Revision-Date: 20091023 Length: 46 pages Keywords: Housing, Collateral Constraints, Bayesian Estimation, Two-sector Models Note: previously circulated as "The Role of Housing Collateral in an Estimated Two-Sector Model of the U.S. Economy" Publication-Status: forthcoming, American Economic Journals: Macroeconomics Classification-JEL: E32, E44, E47, R21, R31 File-URL: http://fmwww.bc.edu/EC-P/wp659.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:659 Template-Type: ReDIF-Paper 1.0 Title: Input and Output Inventories in General Equilibrium Author-Name: Matteo Iacoviello Author-X-Name-First: Matteo Author-X-Name-Last: Iacoviello Author-Email: matteo.iacoviello@bc.edu Author-Person: pia2 Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Fabio Schiantarelli Author-X-Name-First: Fabio Author-X-Name-Last: Schiantarelli Author-Email: schianta@bc.edu Author-Person: psc8 Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Scott Schuh Author-X-Name-First: Scott Author-X-Name-Last: Schuh Author-Workplace-Name: Federal Reserve Bank of Boston Author-Email: scott.schuh@bos.frb.org Abstract: We build and estimate a two-sector (goods and services) dynamic general equilibrium model with two types of inventories: finished goods (output) inventories yield utility services while materials (input) inventories facilitate the production of goods. The model, which contains neutral and inventory-specific technology shocks and preference shocks, is estimated by Bayesian methods. The estimated model replicates the volatility and cyclicality of inventory investment and inventory-target ratios. When estimated over subperiods, the results suggest that changes in the volatility of inventory shocks, or in structural parameters associated with inventories, play a minor role in the reduction of the volatility of output. Series: Boston College Working Papers in Economics Number: 658 Creation-Date: 20070323 Revision-Date: 20091023 Keywords: Inventories, business cycles, output volatility, Bayesian estimation Classification-JEL: E22, E32, E37 File-URL: http://fmwww.bc.edu/EC-P/wp658.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:658 Template-Type: ReDIF-Paper 1.0 Title: Political patronage in Ukranian banking Author-Name: Christopher F. Baum Author-X-Name-First: Christopher Author-X-Name-Last: Baum Author-Person: pba1 Author-Email: baum@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Workplace-Name: DIW Berlin Author-Name: Mustafa Caglayan Author-X-Name-First: Mustafa Author-X-Name-Last: Caglayan Author-Person: pca30 Author-Workplace-Name: University of Sheffield Author-Name: Dorothea Schäfer Author-X-Name-First: Dorothea Author-X-Name-Last: Schäfer Author-Person: psc175 Author-Workplace-Name: DIW Berlin Author-Email: dschaefer@diw.de Author-Name: Oleksandr Talavera Author-X-Name-First: Oleksandr Author-X-Name-Last: Talavera Author-Person: pta65 Author-Email: otalavera@diw.de Author-Workplace-Name: DIW Berlin Abstract: This paper empirically investigates the link between political patronage and bank performance for Ukraine during 2003Q3-2005Q2. We find significant differences between politically affiliated and non-affiliated banks. The data suggest that affiliated banks have significantly lower interest margins. The gap between affiliated banks' and non-affiliated banks' capitalization ratios, is narrowing over time. Parliamentary deputies might use financial institutions to achieve political goals which reduces their banks' performance. Keywords: Political patronage, Ukraine, banking Classification-JEL: G32, G38 Publication-Status: published, Economics of Transition, 16(3), 2008, 537-557; earlier version published (in German) as "Ukrainische Banken: Politische Patronage von Bedeutung", Wochenbericht Nr. 23/2007, DIW Berlin, pp. 367-371. Series: Boston College Working Papers in Economics Number: 657 Creation-Date: 20070214 Revision-Date: 20080213 Length: 19 pages File-URL: http://fmwww.bc.edu/EC-P/wp657.pdf File-Format: application/pdf File-Size: 133 Kb File-Function: main text Handle: RePEc:boc:bocoec:657 Template-Type: ReDIF-Paper 1.0 Title: Mergers and Government Policy Author-Name: Margarita Sapozhnikov Author-X-Name-First: Margarita Author-X-Name-Last: Sapozhnikov Author-Person: psa418 Author-Workplace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Series: Boston College Working Papers in Economics Number: 656 Abstract: It has long been thought that government antitrust policy has an effect on aggregate merger and acquisition activity, but the empirical support for this hypothesis has been weak and inconsistent. This paper uses a new empirical specification and a new dataset on mergers and acquisitions to provide support for this conjecture. Regression analysis shows that government policy has a significant influence on mergers and that the nature of the effects depends on the type of merger. Fitting the time series into a two-state Markov switching model shows that conglomerate and horizontal time series fol low different dynamics for the last half century, which is most likely caused by the dissimilar treatment of the two types of merger by the government. Only the conglomerate merger and acquisition time series is well described by a two-state Markov switching model. In contrast, the horizontal time series has a break in the early 1980s that may be attributed to the dramatic change in government policy. Creation-Date: 20061114 Classification-JEL: L40, K21,C32, C50 Keywords: Antitrust enforcement, mergers and acquisitions, time series models, Markov switching Length: 37 pages File-URL: http://fmwww.bc.edu/EC-P/wp656.pdf File-Format: application/pdf File-Size: 281 Kb File-Function: main text Handle: RePEc:boc:bocoec:656 Template-Type: ReDIF-Paper 1.0 Title: Tiebout's Tale in Spatial Economies: Entrepreneurship, Self-Selection, and Efficiency Author-Name: Hideo Konishi Author-X-Name-First: Hideo Author-X-Name-Last: Konishi Author-Person: pko35 Author-Email: konishih@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Series: Boston College Working Papers in Economics Number: 655 Abstract: This paper establishes the existence and efficiency of equilibrium in a local public goods economy with spatial structures by formalizing Hamilton's (1975 Urban Studies) elaboration of Tiebout's (1956 JPE) tale. We use a well-known equilibrium concept from Rothschild and Stiglitz (1976, QJE) in a market with asymmetric information, and show that Hamilton's zoning policy plays an essential role in proving existence and efficiency of equilibrium. We use an idealized large economy following Ellickson, Grodal, Scotchmer and Zame (1999, Econometrica) and Allouch, Conley and Wooders (2004). Our theorem is directly applicable to the existence and efficiency of a discrete approximation of mono- or multi-centric city equilibrium in urban economics with commuting time costs even if we allow existence of multiple qualities of (collective) residences, when externalities due to traffic congestion are not present. Classification-JEL: C62, D60, H41, H70, H73, R52 Creation-Date: 20061110 Revision-Date: 20080103 Length: 34 pages Publication-Status: published, Regional Science and Urban Economics, 2008, 38:461-471. File-URL: http://fmwww.bc.edu/EC-P/wp655.pdf File-Format: application/pdf File-Size: 270 Kb File-Function: main text Handle: RePEc:boc:bocoec:655 Template-Type: ReDIF-Paper 1.0 Title: Decentralized Matching Markets with Endogenous Salaries Author-Name: Hideo Konishi Author-X-Name-First: Hideo Author-X-Name-Last: Konishi Author-Person: pko35 Author-Email: konishih@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Margarita Sapozhnikov Author-X-Name-First: Margarita Author-X-Name-Last: Sapozhnikov Author-Person: psa418 Author-Workplace-Name: Boston College Series: Boston College Working Papers in Economics Number: 654 Abstract: In a Shapley-Shubik assignment problem with a supermodular output matrix, we consider games in which each firm makes a take-it-or-leave-it salary offer to one applicant, and a match is made only when the offer is accepted by her. We consider both one-shot and multistage games. In either game, we show that there can be many equilibrium salary vectors which are higher or lower than the minimal competitive salary vector. If we exclude artificial equilibria, applicants' equilibrium salary vectors are bounded above by the minimal competitive salary vector, while firms' equilibrium payoff vectors are bounded below by the payoff vector under the minimal competitive salary vector. This suggests that adopting the minimal competitive salary vector as the equilibrium outcome in decentralized markets does not have a strong justification. Creation-Date: 20061110 Revision-Date: 20080103 Classification-JEL: C73, C78, J01 Length: 36 pages Publication-Status: published, Games and Economic Behavior, 2008, 64:193-218. File-URL: http://fmwww.bc.edu/EC-P/wp654.pdf File-Format: application/pdf File-Size: 264 Kb File-Function: main text Handle: RePEc:boc:bocoec:654 Template-Type: ReDIF-Paper 1.0 Title: How Responsive are Charitable Donors to Requests to Give? Author-Name: Bariş K. Yörük Author-X-Name-First: Bariş Author-X-Name-Last: Yörük Author-Person: pyo34 Author-Email: yoruk@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: People tend to contribute to a charity only when they are asked to. Although this so-called 'power of asking' is a well-known technique among fundraisers, the existing literature does not pay much attention to the role of donation requests in charitable giving. We estimate the causal effects of charitable solicitations on both the propensity to give and the amount of charitable contributions using a unique data set, which was designed to measure the giving behavior in the United States. In order to address the endogeneity of the donation requests due to non-random solicitation of charitable donors, we link this data set to IRS data on charitable organizations and the 2000 Census and propose identifying instruments. After controlling for the endogeneity, we find that people are both more likely to contribute to a charity and also donate more when they are asked to. This effect is robust under different specifications and with different sets of instruments and is much larger compared with the estimates of univariate models. Furthermore, we argue that some identifiable characteristics of individuals are associated with the higher probability of being solicited. In particular, we find some evidence that income, age, education, and race play significant roles in explaining the selection of potential charitable donors. Keywords: charitable contributions, charitable solicitations, non-profit organizations Classification-JEL: H31, L30, L38 Series: Boston College Working Papers in Economics Number: 653 Creation-Date: 20061026 Length: 50 pages File-URL: http://fmwww.bc.edu/EC-P/wp653.pdf File-Format: application/pdf File-Size: 520 Kb File-Function: main text Handle: RePEc:boc:bocoec:653 Template-Type: ReDIF-Paper 1.0 Title: Identification and Nonparametric Estimation of a Transformed Additively Separable Model Author-Name: David Jacho-Chavez Author-Workplace-Name: Indiana University Author-Name: Arthur Lewbel Author-X-Name-First:Arthur Author-X-Name-Last: Lewbel Author-Person: ple43 Author-Email: lewbel@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Oliver Linton Author-Workplace-Name: London School of Economics Abstract: Let r(x,z) be a function that, along with its derivatives, can be consistently estimated nonparametrically. This paper discusses identification and consistent estimation of the unknown functions H, M, G and F, where r(x, z) = H[M (x, z)] and M(x,z) = G(x) + F(z). An estimation algorithm is proposed for each of the model's unknown components when r(x, z) represents a conditional mean function. The resulting estimators use marginal integration, and are shown to have a limiting Normal distribution with a faster rate of convergence than unrestricted nonparametric alternatives. Their small sample performance is studied in a Monte Carlo experiment. We empirically apply our results to nonparametrically estimate and test generalized homothetic production functions in four industries within the Chinese economy. Keywords: Partly separable models; Nonparametric regression; Dimension reduction; Generalized homothetic function; Production function. Classification-JEL: C13; C14; C21; D24 Series: Boston College Working Papers in Economics Number: 652 Creation-Date: 20060904 Revision-Date: 20081126 Length: 72 pages File-URL: http://fmwww.bc.edu/EC-P/wp652.pdf File-Format: application/pdf File-Size: 3.3 Mb File-Function: main text Handle: RePEc:boc:bocoec:652 Template-Type: ReDIF-Paper 1.0 Title: Tricks With Hicks: The EASI Demand System Author-Name: Arthur Lewbel Author-X-Name-First:Arthur Author-X-Name-Last: Lewbel Author-Person: ple43 Author-Email: lewbel@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Krishna Pendakur Author-Workplace-Name: Simon Fraser University Abstract: We invent Implicit Marshallian Demands, a new type of demand function that combines desirable features of Hicksian and Marshallian demand functions. We propose and estimate the Exact Affine Stone Index (EASI) Implicit Marshallian Demand system. Like the Almost Ideal Demand (AID) system, EASI budget shares are linear in parameters given real expenditures. However, unlike the AID, EASI demands can have any rank and its Engel curves can be polynomials or splines of any order in real expenditures. EASI error terms equal random utility parameters to account for unobserved preference heterogeneity. EASI demand functions can be estimated using ordinary GMM, and, like AID, an approximate EASI model can be estimated by linear regression. Keywords: Consumer demand, Demand systems, Hicks, Marshallian, Cost functions, Expenditure functions, Utility, Engel curves. Classification-JEL: D11, D12, C31, C33, C51 Publication-Status: Published, American Economic Review, June 2009 Series: Boston College Working Papers in Economics Number: 651 Creation-Date: 20060904 Revision-Date: 20081126 Length: 51 pages File-URL: http://fmwww.bc.edu/EC-P/wp651.pdf File-Format: application/pdf File-Size: 2.17 Mb File-Function: main text Handle: RePEc:boc:bocoec:651 Template-Type: ReDIF-Paper 1.0 Title: Modeling Heterogeneity Author-Name: Arthur Lewbel Author-X-Name-First:Arthur Author-X-Name-Last: Lewbel Author-Person: ple43 Author-Email: lewbel@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: My goal here is to provide some synthesis of recent results regarding unobserved heterogeneity in nonlinear and semiparametric models, using as a context Matzkin (2005a) and Browning and Carro (2005), which were the papers presented in the Modeling Heterogeneity session of the 2005 Econometric Society World Meetings in London. These papers themselves consist of enormously heterogeneous content, ranging from high theory to Danish milk, which I will attempt to homogenize. The overall theme of this literature is that, in models of individual economic agents, errors at least partly reflect unexplained heterogeneity in behavior, and hence in tastes, technologies, etc.,. Economic theory can imply restrictions on the structure of these errors, and in particular can generate nonadditive or nonseparable errors, which has profound implications for model specification, identification, estimation, and policy analysis. Keywords: unobserved heterogeneity, nonlinear models, semiparametric models Classification-JEL: Series: Boston College Working Papers in Economics Number: 650 Creation-Date: 20060904 Length: 13 pages File-URL: http://fmwww.bc.edu/EC-P/wp650.pdf File-Format: application/pdf File-Size: 180 Kb File-Function: main text Handle: RePEc:boc:bocoec:650 Template-Type: ReDIF-Paper 1.0 Title: Are Earnings Inequality and Mobility Overstated? The Impact of Non-Classical Measurement Error Author-Name: Peter Gottschalk Author-X-Name-First: Peter Author-X-Name-Last: Gottschalk Author-Email: peter.gottschalk@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Minh Huynh Author-X-Name-First: Minh Author-X-Name-Last: Huynh Author-WorkPlace-Name: U.S. Social Security Administration Series: Boston College Working Papers in Economics Number: 649 Abstract: Measures of inequality and mobility based on self-reported earnings reflect attributes of both the joint distribution of earnings across time and the joint distribution of measurement error and earnings. While classical measurement error would increase measures of inequality and mobility there is substantial evidence that measurement error in earnings is not classical. In this paper we present the analytical links between non-classical measurement error and measures of inequality and mobility. The empirical importance of non-classical measurement error is explored using the Survey of Income and Program Participation matched to tax records. We find that the effects of non-classical measurement error are large. However, these non-classical effects are largely offsetting when estimating mobility. As a result SIPP estimates of mobility are similar to estimates based on tax records, though SIPP estimates of inequality are smaller than estimates based on tax records. Creation-Date: 20060802 Publication-Status: forthcoming, Review of Economics and Statistics File-URL: http://fmwww.bc.edu/EC-P/wp649.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:649 Template-Type: ReDIF-Paper 1.0 Title: Optimal Debt Contracts when Credit Managers are (Perhaps) Corruptible Author-Name: Ingela Alger Author-X-Name-First: Ingela Author-X-Name-Last: Alger Author-Person: pal24 Author-Email: ingela.alger@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Series: Boston College Working Papers in Economics Number: 648 Abstract: The paper derives the optimal organizational response of a bank (the principal) which faces a risk of collusion between the credit manager (the agent) and the credit-seeking firms. The bank can deter collusion either through internal incentives or by distorting the credit contracts. The model thus explicitly takes into account the interaction between internal (collusion) risks and external (default) risks in the optimal design of the internal organization as well as of the credit contracts. We investigate this question in two settings. In the first one, we adopt the standard assumption that the agent is always willing to collude (is corruptible) if that increases his monetary payoff. In the second one, he is corruptible with some probability only, and honest otherwise. A novel feature of our approach is to allow for screening among corruptible and honest agents. We find that if the probability that the agent is honest is sufficiently large, collusion occurs in equilibrium. Creation-Date: 20060826 Length: 36 pages File-URL: http://fmwww.bc.edu/EC-P/wp648.pdf File-Format: application/pdf File-Size: 234 Kb File-Function: main text Handle: RePEc:boc:bocoec:648 Template-Type: ReDIF-Paper 1.0 Title: Government Policy and the Effectiveness of Foreign Aid Author-Name: Robert G. Murphy Author-X-Name-First: Robert Author-X-Name-Last: Murphy Author-Email: robert.murphy.1@bc.edu Author-Person: pmu16 Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Nicholas G. Tresp Author-X-Name-First: Nicholas Author-X-Name-Last: Tresp Author-Workplace-Name: UBS Investment Bank Abstract: This paper reconsiders the role of economic policy in determining the effectiveness of foreign aid for generating economic growth in developing countries. We update and modify the data set originally used by Burnside and Dollar (2000) in order to more fully consider the critique presented by Easterly et al. (2004). Our findings suggest that the relationship among foreign aid, government policy, and economic growth is tenuous and depends importantly on the subset of countries included in the analysis. Good policy enhances the effectiveness of foreign aid in spurring growth when we use the original set of countries included in Burnside and Dollar, but this relationship disappears for an expanded set of countries. Because the relationship among aid, policy, and growth is likely to be nonlinear, we present an alternative probit model emphasizing growth thresholds. Our results from this alternative analysis confirm the conclusions of Easterly et al., finding little support for the view that good policy increases the probability that foreign aid contributes to growth. Keywords: foreign aid, economic development, economic growth, government policy, development assistance Classification-JEL: O11, O23, F43 Series: Boston College Working Papers in Economics Number: 647 Creation-Date: 20060809 Revision-Date: 20060829 Length: 18 pages File-URL: http://fmwww.bc.edu/EC-P/wp647.pdf File-Format: application/pdf File-Size: 248 Kb File-Function: main text Handle: RePEc:boc:bocoec:647 Template-Type: ReDIF-Paper 1.0 Title: Uncertainty Determinants of Firm Investment Author-Name: Christopher F. Baum Author-X-Name-First: Christopher Author-X-Name-Last: Baum Author-Person: pba1 Author-Email: baum@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Workplace-Name: DIW Berlin Author-Name: Mustafa Caglayan Author-X-Name-First: Mustafa Author-X-Name-Last: Caglayan Author-Person: pca30 Author-Workplace-Name: University of Sheffield Author-Name: Oleksandr Talavera Author-X-Name-First: Oleksandr Author-X-Name-Last: Talavera Author-Person: pta65 Author-Email: otalavera@diw.de Author-Workplace-Name: DIW Berlin Abstract: We investigate the impact of measures of uncertainty on firms' capital investment behavior using a panel of U.S. firms. Increases in firm-specific and CAPM-based measures have a significant negative impact on investment spending, while market-based uncertainty has a positive impact. Keywords: capital investment, asymmetric information, financial frictions, uncertainty, CAPM Classification-JEL: E22, D81, C23 Publication-Status: published, Economics Letters, 98/3, 282-287, 2008. Series: Boston College Working Papers in Economics Number: 646 Creation-Date: 20060728 Revision-Date: 20070224 File-URL: http://fmwww.bc.edu/EC-P/wp646.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:646 Template-Type: ReDIF-Paper 1.0 Title: Calibration Results for Non-Expected Utility Theories Author-Name: Zvi Safra Author-X-Name-First: Zvi Author-X-Name-Last: Safra Author-Workplace-Name: Tel Aviv University Author-Name: Uzi Segal Author-X-Name-First: Uzi Author-X-Name-Last: Segal Author-Person: pse40 Author-Email: uzi.segal@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Series: Boston College Working Papers in Economics Number: 645 Abstract: Rabin proved that a low level of risk aversion with respect to small gambles leads to a high, and absurd, level of risk aversion with respect to large gambles. Rabin's arguments strongly depend on expected utility theory, but we show that similar arguments apply to almost all non-expected utility theories. Creation-Date: 20060724 Length: 18 pages Classification-JEL: Keywords: File-URL: http://fmwww.bc.edu/EC-P/wp645.pdf File-Format: application/pdf File-Size: 204 Kb File-Function: main text Handle: RePEc:boc:bocoec:645 Template-Type: ReDIF-Paper 1.0 Title: Returns to Scale in Networks Author-Name: Marvin Kraus Author-X-Name-First: Marvin Author-X-Name-Last: Kraus Author-Email: kraus@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Person: pkr27 Series: Boston College Working Papers in Economics Number: 644 Length: 14 pages Keywords: Networks, congestion, returns to scale, congestion pricing Classification-JEL: Creation-Date: 20060719 File-URL: http://fmwww.bc.edu/EC-P/wp644.pdf File-Format: application/pdf Handle: RePEc:boc:bocoec:644 Template-Type: ReDIF-Paper 1.0 Title: Altruism and Climate Author-Name: Ingela Alger Author-X-Name-First: Ingela Author-X-Name-Last: Alger Author-Person: pal24 Author-Email: ingela.alger@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Jörgen W. Weibull Author-X-Name-First: Jörgen Author-X-Name-Last: Weibull Author-WorkPlace-Name: Stockholm School of Economics Series: Boston College Working Papers in Economics Number: 643 Abstract: Recognizing that individualism, or weak family ties, may be favorable to economic development, we ask how family ties interact with climate to determine individual behavior and whether there is reason to believe that the strength of family ties evolves differently in different climates. For this purpose, we develop a simple model of the interaction between two individuals who are more or less altruistic towards each other. Each individual exerts effort to produce a consumption good under uncertainty. Outputs are observed and each individual chooses how much, if any, of his or her output to share with the other. We analyze how the equilibrium outcome depends on altruism and climate for ex ante identical individuals. We also consider (a) "coerced altruism," that is, situations where a social norm dictates how output be shared, (b) the effects of insurance markets ,and (c) the role of institutional quality. The evolutionary robustness of altruism is analyzed and we study how this depends on climate. Keywords: altruism, family ties, individualism, moral hazard, evolution. Classification-JEL: D02, D13 Creation-Date: 20060710 File-URL: http://fmwww.bc.edu/EC-P/wp643.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:643 Template-Type: ReDIF-Paper 1.0 Title: Productivity and U.S. Macroeconomic Performance: Interpreting the Past and Predicting the Future with a Two-Sector Real Business Cycle Model Author-Name: Peter N. Ireland Author-X-Name-First: Peter Author-X-Name-Last: Ireland Author-Person: pir1 Author-Email: peter.ireland@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Scott Schuh Author-X-Name-First: Scott Author-X-Name-Last: Schuh Author-Workplace-Name: Federal Reserve Bank of Boston Author-Email: scott.schuh@bos.frb.org Abstract: A two-sector real business cycle model, estimated with postwar U.S. data, identifies shocks to the levels and growth rates of total factor productivity in distinct consumption- and investment-goods-producing technologies. This model attributes most of the productivity slowdown of the 1970s to the consumption-goods sector; it suggests that a slowdown in the investment-goods sector occurred later and was much less persistent. Against this broader backdrop, the model interprets the more recent episode of robust investment and investment-specific technological change during the 1990s largely as a catch-up in levels that is unlikely to persist or be repeated anytime soon. Classification-JEL: E32, O41, O47 Keywords: productivity, real business cycle Series: Boston College Working Papers in Economics Number: 642 Creation-Date: 20060401 File-URL: http://fmwww.bc.edu/EC-P/wp642.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:642 Template-Type: ReDIF-Paper 1.0 Title: On the Sensitivity of the Volume and Volatility of Bilateral Trade Flows to Exchange Rate Uncertainty Author-Name: Christopher F. Baum Author-X-Name-First: Christopher Author-X-Name-Last: Baum Author-Person: pba1 Author-Email: baum@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Workplace-Name: DIW Berlin Author-Name: Mustafa Caglayan Author-X-Name-First: Mustafa Author-X-Name-Last: Caglayan Author-Person: pca30 Author-Workplace-Name: University of Sheffield Abstract: We present an empirical investigation of the hypotheses that exchange rate volatility may have an impact on both the volume and variability of trade flows by considering a broad set of industrial countries' bilateral real trade flows over the period 1980-1998. Similar to the findings of earlier theoretical and empirical research, our first set of results shows that the impact of exchange rate uncertainty on trade flows is indeterminate. Our second set of results provides new and novel findings that exchange rate volatility has a consistent positive and significant effect on the volatility of bilateral trade flows, helping us better understand macroeconomic volatility. Keywords: exchange rates, volatility, fractional integration, trade flows Classification-JEL: F17, F31, C22 Series: Boston College Working Papers in Economics Number: 641 Creation-Date: 20060416 Revision-Date: 20080206 Publication-Status: published, Journal of International Money and Finance, 29:79-93, 2010. Note: previously circulated as "Effects of Exchange Rate Volatility on the Volume and Volatility of Bilateral Exports" Length: 28 pages File-URL: http://fmwww.bc.edu/EC-P/wp641.pdf File-Format: application/pdf File-Size: 211 Kb File-Function: main text Handle: RePEc:boc:bocoec:641 Template-Type: ReDIF-Paper 1.0 Title: Kidney Exchange with Good Samaritan Donors: A Characterization Author-Name: Tayfun Sönmez Author-X-Name-First: Tayfun Author-X-Name-Last: Sönmez Author-Email: sonmezt@bc.edu Author-Person: psi57 Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: M. Utku Ünver Author-X-Name-First: M. Author-X-Name-Last: Ünver Author-WorkPlace-Name: University of Pittsburgh Abstract: We analyze mechanisms to kidney exchange with good samaritan donors where exchange is feasible not only among donor-patient pairs but also among such pairs and non-directed alturistic donors. We show that you request my donor-I get your turn mechanism (Abdulkadiroglu and Sonmez [1999]) is the only mechanism that is Pareto efficient, individually rational, strategy-proof, weakly neutral and consistent. Series: Boston College Working Papers in Economics Number: 640 Creation-Date: 20060213 Length: 30 pages Keywords: Kidney exchange, matching, strategy-proofness, consistency. Publication-Status: forthcoming as "House Allocation with Existing Tenants: A Characterization", Games and Economic Behavior File-URL: http://fmwww.bc.edu/EC-P/wp640.pdf File-Format: application/pdf File-Size: 260 Kb File-Function: main text Handle: RePEc:boc:bocoec:640 Template-Type: ReDIF-Paper 1.0 Title: Changing the Boston School Choice Mechanism Author-Name: Atila Abdulkadiroglu Author-X-Name-First: Atila Author-X-Name-Last: Abdulkadiroglu Author-Workplace-Name: Columbia University Author-Name: Parag A. Pathak Author-X-Name-First: Parag Author-X-Name-Last: Pathak Author-Workplace-Name: Harvard University Author-Name: Alvin E. Roth Author-X-Name-First: Alvin Author-X-Name-Last: Roth Author-Workplace-Name: Harvard University Author-Name: Tayfun Sönmez Author-X-Name-First: Tayfun Author-X-Name-Last: Sönmez Author-Email: sonmezt@bc.edu Author-Person: psi57 Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: In July 2005 the Boston School Committee voted to replace the existing Boston school choice mechanism with a deferred acceptance mechanism that simplifies the strategic choices facing parents. This paper presents the empirical case against the previous Boston mechanism, a priority matching mechanism, and the case in favor of the change to a strategy-proof mechanism. Using detailed records on student choices and assignments, we present evidence both of sophisticated strategic behavior among some parents, and of unsophisticated strategic behavior by others. We find evidence that some parents pay close attention to the capacity constraints of different schools, while others appear not to. In particular, we show that many unassigned students could have been assigned to one of their stated choices with a different strategy under the current mechanism. This interaction between sophisticated and unsophisticated players identifies a new rationale for strategy-proof mechanisms based on fairness, and was a critical argument in Boston's decision to change the mechanism. We then discuss the considerations that led to the adoption of a deferred acceptance mechanism as opposed to the (also strategy-proof) top trading cycles mechanism. Series: Boston College Working Papers in Economics Number: 639 Creation-Date: 20060107 Length: 58 pages File-URL: http://fmwww.bc.edu/EC-P/wp639.pdf File-Format: application/pdf File-Size: 1.1 Mb File-Function: main text Handle: RePEc:boc:bocoec:639 Template-Type: ReDIF-Paper 1.0 Title: On the Sensitivity of Firms' Investment to Cash Flow and Uncertainty Author-Name: Christopher F. Baum Author-X-Name-First: Christopher Author-X-Name-Last: Baum Author-Person: pba1 Author-Email: baum@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Workplace-Name: DIW Berlin Author-Name: Mustafa Caglayan Author-X-Name-First: Mustafa Author-X-Name-Last: Caglayan Author-Person: pca30 Author-Workplace-Name: University of Sheffield Author-Name: Oleksandr Talavera Author-X-Name-First: Oleksandr Author-X-Name-Last: Talavera Author-Person: pta65 Author-Email: o.talavera@rgu.ac.uk Author-Workplace-Name: Aberdeen Business School Abstract: We investigate the analytical and empirical linkages between cash flow, uncertainty and firms' capital investment behavior. Our empirical approach constructs measures of own- and market-specific uncertainty from firms' daily stock returns and S&P 500 index returns along with a CAPM-based risk measure. Our results indicate that even in the presence of important firm-specific variables, uncertainty is an important determinant of firms' investment behavior. Depending on the measure of uncertainty used, investment may be stimulated or curtailed by the effects of uncertainty on its own or through its interactions on cash flow. Note: previously circulated as "Firm Investment and Financial Frictions" Keywords: capital investment, cash flow, financial frictions, uncertainty, CAPM Classification-JEL: E22, D81, C23 Series: Boston College Working Papers in Economics Number: 638 Creation-Date: 20060215 Revision-Date: 20080426 Publication-Status: published, Oxford Economic Papers, 62, 286-306, 2010 Length: 24 pages File-URL: http://fmwww.bc.edu/EC-P/wp638.pdf File-Format: application/pdf File-Size: 212 Kb File-Function: main text Handle: RePEc:boc:bocoec:638 Template-Type: ReDIF-Paper 1.0 Title: The Effects of Industry-Level Uncertainty on Cash Holdings: The Case of Germany Author-Name: Christopher F. Baum Author-X-Name-First: Christopher Author-X-Name-Last: Baum Author-Person: pba1 Author-Email: baum@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Workplace-Name: DIW Berlin Author-Name: Dorothea Schäfer Author-X-Name-First: Dorothea Author-X-Name-Last: Schäfer Author-Person: psc175 Author-Workplace-Name: DIW Berlin Author-Email: dschaefer@diw.de Author-Name: Oleksandr Talavera Author-X-Name-First: Oleksandr Author-X-Name-Last: Talavera Author-Person: pta65 Author-Email: otalavera@diw.de Author-Workplace-Name: DIW Berlin Abstract: This paper investigates the link between the optimal level of non-financial firms' liquid assets and industry-level uncertainty. We develop a structural model of a firm's value maximization problem that predicts that as industry-level uncertainty increases the firm will increase its optimal level of liquidity. We test this hypothesis using a panel of German firms drawn from the Bundesbank's balance sheet database and show that greater uncertainty at the industry level causes firms to increase their cash holdings. The strength of these effects differ among subsamples of the firms with different characteristics. Keywords: Uncertainty, cash holdings, liquidity, non-financial firms Classification-JEL: G31, G32, L14 Series: Boston College Working Papers in Economics Number: 637 Creation-Date: 20060213 Revision-Date: 20060805 Length: 20 pages File-URL: http://fmwww.bc.edu/EC-P/wp637.pdf File-Format: application/pdf File-Size: 188 Kb File-Function: main text Handle: RePEc:boc:bocoec:637 Template-Type: ReDIF-Paper 1.0 Title: The Effects of Short-Term Liabilities on Profitability: A Comparison of German and US Firms Author-Name: Christopher F. Baum Author-X-Name-First: Christopher Author-X-Name-Last: Baum Author-Person: pba1 Author-Email: baum@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Workplace-Name: DIW Berlin Author-Name: Dorothea Schäfer Author-X-Name-First: Dorothea Author-X-Name-Last: Schäfer Author-Person: psc175 Author-Workplace-Name: DIW Berlin Author-Email: dschaefer@diw.de Author-Name: Oleksandr Talavera Author-X-Name-First: Oleksandr Author-X-Name-Last: Talavera Author-Person: pta65 Author-Email: otalavera@diw.de Author-Workplace-Name: DIW Berlin Abstract: The paper adopts the methodology of the empirical finance literature to analyze a common question that liability maturity structure has an impact on firm performance. A comparison is made between two countries, the US and Germany, with different types of financial systems. We find that German firms that rely more heavily on short-term liabilities are likely to be more profitable. The link between liability maturity structure and profitability does not appear in the results from the US sample, which reflects the importance of institutional factors. Keywords: profitability, short-term liabilities, maturity structure, capital structure. Classification-JEL: G32, G30 Series: Boston College Working Papers in Economics Number: 636 Creation-Date: 20060213 Revision-Date: 20070414 Length: 19 pages File-URL: http://fmwww.bc.edu/EC-P/wp636.pdf File-Format: application/pdf File-Size: 164 Kb File-Function: main text Handle: RePEc:boc:bocoec:636 Template-Type: ReDIF-Paper 1.0 Title: Should Monetary Policy use Long-term Rates? Author-Name: Mariano Kulish Author-X-Name-First: Mariano Author-X-Name-Last: Kulish Author-Workplace-Name: Reserve Bank of Australia Series: Boston College Working Papers in Economics Number: 635 Abstract: This paper studies two roles that long-term nominal interest rates can play in the conduct of monetary policy in a New Keynesian model. The first allows long-term rates to enter the reaction function of the monetary authority. The second considers the possibility of using long-term rates as instruments of policy. It is shown that in both cases a unique rational expectations equilibrium exists. Reacting to movements in long yields does not improve macroeconomic performance as measured by the loss function. However, long-term rates turn out to be better instruments when the relative concern of the monetary authority for inflation volatility is high. Creation-Date: 20051121 Length: 46 pages Keywords: interest rates, monetary policy File-URL: http://fmwww.bc.edu/EC-P/wp635.pdf File-Format: application/pdf File-Size: 760 Kb File-Function: main text Handle: RePEc:boc:bocoec:635 Template-Type: ReDIF-Paper 1.0 Title: Uncertainty Determinants of Corporate Liquidity Author-Name: Christopher F. Baum Author-X-Name-First: Christopher Author-X-Name-Last: Baum Author-Person: pba1 Author-Email: baum@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Workplace-Name: DIW Berlin Author-Name: Mustafa Caglayan Author-X-Name-First: Mustafa Author-X-Name-Last: Caglayan Author-Person: pca30 Author-Workplace-Name: University of Sheffield Author-Name: Andreas Stephan Author-X-Name-First: Andreas Author-X-Name-Last: Stephan Author-WorkPlace-Name: Europa-Universitat Viadrina Author-Workplace-Name: DIW Berlin Author-Name: Oleksandr Talavera Author-X-Name-First: Oleksandr Author-X-Name-Last: Talavera Author-Person: pta65 Author-Email: oleksandr.talavera@googlemail.com Author-Workplace-Name: Aberdeen Business School Abstract: This paper investigates the link between the optimal level of non-financial firms' liquid assets and uncertainty. We develop a partial equilibrium model of precautionary demand for liquid assets showing that firms alter their liquidity ratio in response to changes in either macroeconomic or idiosyncratic uncertainty. We test this hypothesis using a panel of non-financial US firms drawn from the COMPUSTAT quarterly database covering the period 1993-2002. The results indicate that firms increase their liquidity ratios when macroeconomic uncertainty or idiosyncratic uncertainty increases. Keywords: liquidity, uncertainty, non-financial firms, dynamic panel data Classification-JEL: C23, D8, D92, G32 Series: Boston College Working Papers in Economics Number: 634 Publication-Status: published, Economic Modelling, 25 (2008), pp. 833-849 Creation-Date: 20051207 Revision-Date: 20061009 File-URL: http://fmwww.bc.edu/EC-P/wp634.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:634 Template-Type: ReDIF-Paper 1.0 Title: Are Universal Preferences Possible? Calibration Results for Non-Expected Utility Theories Author-Name: Zvi Safra Author-X-Name-First: Zvi Author-X-Name-Last: Safra Author-Workplace-Name: Tel Aviv University Author-Name: Uzi Segal Author-X-Name-First: Uzi Author-X-Name-Last: Segal Author-Person: pse40 Author-Email: uzi.segal@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Series: Boston College Working Papers in Economics Number: 633 Abstract: Rabin proved that a low level of risk aversion with respect to small gambles leads to a high, and absurd, level of risk aversion with respect to large gambles. Rabin's arguments strongly depend on expected utility theory, but we show that similar arguments apply to almost all non-expected utility theories and even to theories dealing with uncertainty. The set of restrictions needed in order to avoid such absurd behavior may suggest that the assumption of universality of preferences over final wealth is too strong. Creation-Date: 20051205 Length: 39 pages Classification-JEL: Keywords: File-URL: http://fmwww.bc.edu/EC-P/wp633.pdf File-Format: application/pdf File-Size: 304 Kb File-Function: main text Handle: RePEc:boc:bocoec:633 Template-Type: ReDIF-Paper 1.0 Title: Antidumping: Prospects for Discipline from the Doha Negotiations Author-Name: J. Michael Finger Author-X-Name-First: J. Michael Author-X-Name-Last: Finger Author-Workplace-Name: World Bank Author-Name: Andrei Zlate Author-X-Name-First: Andrei Author-X-Name-Last: Zlate Author-Email: zlate@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: Maintaining an economically sensible trade policy is often a matter of managing pressures for exceptions – for protection for a particular industry. Good policy becomes a matter of managing interventions so as to strengthen the politics of openness and liberalization---of avoiding rather than of imposing such restrictions in the future. In the 1990s, antidumping measures emerged as the instrument of choice to accomplish this, despite the fact that they satisfy neither of these criteria. Its economics is ordinary protection; it considers the impact on the domestic interests that will benefit while excluding the domestic interests that will bear the costs. Its unfair trade rhetoric undercuts rather than supports a policy of openness. As to what would be better, the key issue in a domestic policy decision should be the impact on the domestic economy. Antidumping reform depends less on the good will of WTO delegates toward the "public interest" than on those business interests that are currently treated by trade law as bastards insisting that they be given the same standing as the law now recognizes for protection seekers. Series: Boston College Working Papers in Economics Number: 632 Publication-Status: published, Journal of World Investment and Trade, 6:4, 2005 Creation-Date: 20051117 Length: 44 pages Keywords: Doha round; antidumping; countervailing measures; safeguards; non-tariff barriers to trade; WTO/GATT Classification-JEL: F13, K33, N70, O24 File-URL: http://fmwww.bc.edu/EC-P/wp632.pdf File-Format: application/pdf File-Size: 272 Kb File-Function: main text Handle: RePEc:boc:bocoec:632 Template-Type: ReDIF-Paper 1.0 Title: Banks and Innovation: Microeconometric Evidence on Italian Firms Author-Name: Luigi Benfratello Author-X-Name-First: Luigi Author-X-Name-Last: Benfratello Author-Workplace-Name: Università di Torino Author-Name: Fabio Schiantarelli Author-X-Name-First: Fabio Author-X-Name-Last: Schiantarelli Author-Email: schianta@bc.edu Author-Person: psc8 Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Alessandro Sembenelli Author-X-Name-First: Alessandro Author-X-Name-Last: Sembenelli Author-Workplace-Name: Università di Torino Abstract: This paper contains a detailed empirical investigation of the effect of local banking development on firms' innovative activities, using a rich data set on innovation at the firm level for a large number of Italian firms over the 90's. There is evidence that banking development affects the probability of process innovation, particularly for small firms and for firms in high(er) tech sectors and in sectors more dependent upon external finance. There is also some evidence that banking development reduces the cash flow sensitivity of fixed investment spending, particularly for small firms, and that it increases the probability they will engage in R&D. Series: Boston College Working Papers in Economics Number: 631 Creation-Date: 20051030 Revision-Date: 20070613 Keywords: Banks, Financial Development, Innovation, R&D, Investment Classification-JEL: D24, G21, G38, O31, O33 File-URL: http://fmwww.bc.edu/EC-P/wp631.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:631 Template-Type: ReDIF-Paper 1.0 Title: Economics as Vocation: Lessons for the Church in the 21st Century Author-Name: Francis M. McLaughlin Author-X-Name-First: Francis Author-X-Name-Last: McLaughlin Author-Email: mclaughf@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Series: Boston College Working Papers in Economics Number: 630 Keywords: Economics, vocation, church Creation-Date: 20051109 Classification-JEL: A1 File-URL: http://fmwww.bc.edu/EC-P/wp630.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:630 Template-Type: ReDIF-Paper 1.0 Title: Household Debt and Income Inequality, 1963-2003 Author-Name: Matteo Iacoviello Author-X-Name-First: Matteo Author-X-Name-Last: Iacoviello Author-Email: matteo.iacoviello@bc.edu Author-Person: pia2 Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: I construct an economy with heterogeneous agents that mimics the time-series behavior of the earnings distribution in the United States from 1963 to 2003. Agents face aggregate and idiosyncratic shocks and accumulate real and financial assets. I estimate the shocks that drive the model using data on income inequality, aggregate income, and measures of financial liberalization. I show how the model economy can replicate two empirical facts: the trend and cyclical behavior of household debt, and the diverging patterns in consumption and wealth inequality over time. While business cycle fluctuations can account for the short-run changes in household debt, its prolonged rise of the 1980s and the 1990s can be quantitatively explained only by the concurrent increase in income inequality. Series: Boston College Working Papers in Economics Number: 629 Keywords: Credit constraints, Incomplete Markets, Income Inequality, Household Debt Creation-Date: 20051103 Revision-Date: 20071018 Publication-Status: forthcoming, Journal of Money, Credit and Banking Classification-JEL: E31, E32, E44, E52, R21 File-URL: http://fmwww.bc.edu/EC-P/wp629.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:629 Template-Type: ReDIF-Paper 1.0 Title: The Monetary Transmission Mechanism Author-Name: Peter N. Ireland Author-X-Name-First: Peter Author-X-Name-Last: Ireland Author-Person: pir1 Author-Email: peter.ireland@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: The monetary transmission mechanism describes how policy-induced changes in the nominal money stock or the short-term nominal interest rate impact on real variables such as aggregate output and employment.  Specific channels of monetary transmission operate through the effects that monetary policy has on interest rates, exchange rates, equity and real estate prices, bank lending, and firm balance sheets.  Recent research on the transmission mechanism seeks to understand how these channels work in the context of dynamic, stochastic, general equilibrium models. Classification-JEL: E52. Keywords: Monetary transmission mechanism Series: Boston College Working Papers in Economics Number: 628 Creation-Date: 20051019 Length: 14 pages File-URL: http://fmwww.bc.edu/EC-P/wp628.pdf File-Format: application/pdf File-Size: 160 Kb File-Function: main text Handle: RePEc:boc:bocoec:628 Template-Type: ReDIF-Paper 1.0 Title: Spatial Competition between Parking Garages and Downtown Parking Policy Author-Name: Richard Arnott Author-X-Name-First: Richard Author-X-Name-Last: Arnott Author-Person: par13 Author-Email: arnottr@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Series: Boston College Working Papers in Economics Number: 627 Abstract: This paper looks at parking policy in dense urban districts ("downtown"), where spatial competition between parking garages is a key feature. The paper has four parts. The first looks at the "parking garage operator's problem". The second derives the equilibrium in the parking garage market when there is no on-street parking, compares the equilibrium to the social optimum, and examines parking policy in this context. The third considers how the presence of on-street parking alters the analysis, and the fourth extends the analysis to include mass transit. Keywords: parking, off-street parking, on-street parking, parking garages, mass transit, parking policy, second best, spatial competition Classification-JEL: R40, L91 Creation-Date: 20050930 Length: pages File-URL: http://fmwww.bc.edu/EC-P/wp627.pdf File-Format: application/pdf File-Size: 437 Kb File-Function: main text Handle: RePEc:boc:bocoec:627 Template-Type: ReDIF-Paper 1.0 Title: Are Traditional Retirements a Thing of the Past? New Evidence on Retirement Patterns and Bridge Jobs Author-Name: Kevin E. Cahill Author-X-Name-First: Kevin Author-X-Name-Last: Cahill Author-Name: Michael D. Giandrea Author-X-Name-First: Michael Author-X-Name-Last: Giandrea Author-Name: Joseph F. Quinn Author-Email: quinnj@bc.edu Author-Person: pqu7 Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: This paper investigates whether permanent, one-time retirements are coming to an end just as the trend towards earlier and earlier retirements did nearly 20 years ago. We explore how common bridge jobs are among today's retirees, and how uncommon traditional retirements have become. Methods: Using data from the Health and Retirement Study (HRS), we explore the work histories and retirement patterns of a cohort of retirees aged 51 to 61 in 1992 over a ten-year time period in both a cross-sectional and longitudinal context. Bridge job determinants are examined using bivariate comparisons and a multinomial logistic regression model of the bridge job decision. Results: We find that one-half to two-thirds of the HRS respondents with full-time career jobs take on bridge jobs before exiting the labor force completely. We also find that bridge job behavior is most common among younger respondents, respondents without defined-benefit pension plans, and respondents at the lower- and upper-end of the wage distribution. Implications: The evidence suggests that changes in the retirement income landscape since the 1980s appear to be taking root. Going forward, traditional retirements will be the exception rather than the rule. Series: Boston College Working Papers in Economics Number: 626 Creation-Date: 20050929 Keywords: Economics of Aging, Partial Retirement, Gradual Retirement Classification-JEL: J26, J14, J32, H55 File-URL: http://fmwww.bc.edu/EC-P/wp626.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:626 Template-Type: ReDIF-Paper 1.0 Title: Does Financial Liberalization Improve the Allocation of Investment? Micro Evidence from Developing Countries Author-Name: Arturo Galindo Author-X-Name-First: Arturo Author-X-Name-Last: Galindo Author-Name: Fabio Schiantarelli Author-X-Name-First: Fabio Author-X-Name-Last: Schiantarelli Author-Email: schianta@bc.edu Author-Person: psc8 Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Andrew Weiss Author-X-Name-First: Andrew Author-X-Name-Last: Weiss Author-Workplace-Name: Boston University Abstract: Using firm level panel data from twelve developing countries we explore if financial liberalization improves the efficiency with which investment funds are allocated. A summary index of the efficiency of investment allocation that measures whether investment funds are going to firms with a higher marginal return to capital is developed. We examine the relationship between this and various measures of financial liberalization and find that liberalization increases the efficiency with which investment funds are allocated. This holds after various robustness checks and is consistent with firm level evidence that a stronger association between investment and fundamentals after financial liberalization. Series: Boston College Working Papers in Economics Number: 625 Creation-Date: 20051004 Length: 51 pages Publication-Status: forthcoming, Journal of Development Economics Keywords: financial liberalization, investment, efficiency, reform, development Classification-JEL: E22, E44, G28, O16 File-URL: http://fmwww.bc.edu/EC-P/wp625.pdf File-Format: application/pdf File-Size: 328 Kb File-Function: main text Handle: RePEc:boc:bocoec:625 Template-Type: ReDIF-Paper 1.0 Title: Competition and Advertising in Specialized Markets: A Study of the U.S. Pharmaceutical Industry Author-Name: Amrita Bhattacharyya Author-X-Name-First: Amrita Author-X-Name-Last: Bhattacharyya Author-Email: bhattaam@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Series: Boston College Working Papers in Economics Number: 624 Abstract: This paper analyzes advertising incentives and strategies in specialized markets, where consumers' decisions are dictated by experts. By analyzing the market stealing and market expanding aspects of advertising, this study shows that in a sub-game perfect equilibrium only some (and not all) firms may choose to advertise to consumers. From the welfare perspective, consumer advertising is socially optimal when advertising has only market expanding effects. Furthermore, a simple game-theoretic model shows that when only some firms advertise to consumers, the crucial determinant of advertising is the number of advertisers. In particular, with increased competition from rival advertisers, each firm's advertising decreases. Modeling specific features of the U.S. prescription drugs market the theoretical analysis suggests that the wide variation in direct-to-consumer-advertising (DTCA) by U.S. pharmaceutical companies both within and across drug classes is due to differences in disease-familiarity and heterogeneity in patients' types. Using annual, brand-level DTCA expenditure data for prescription drugs, empirical results give evidence of the negative impact of competition on advertising. Keywords: Advertising, Competition, Pharmaceutical, Expert, Nash equilibrium Classification-JEL: L0, M3, I0 Note: previously circulated as "Why Count Advertising Rivals? Competition and Consumer Advertising in Specialized Markets" Creation-Date: 20050929 Revision-Date: 20051110 Length: 33 pages File-URL: http://fmwww.bc.edu/EC-P/wp624.pdf File-Format: application/pdf File-Size: 256 Kb File-Function: main text Handle: RePEc:boc:bocoec:624 Template-Type: ReDIF-Paper 1.0 Title: Product Market Regulation and Macroeconomic Performance: A Review of Cross Country Evidence Author-Name: Fabio Schiantarelli Author-X-Name-First: Fabio Author-X-Name-Last: Schiantarelli Author-Email: schianta@bc.edu Author-Person: psc8 Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: The main purpose of this paper is to provide a critical overview of the recent empirical contributions that use cross-country data to study the effect of product market regulation and reform on a country’s macroeconomic performance. After a review of the theoretical literature and of relevant micro-econometric evidence, the paper discusses the main data and methodological issues related to empirical work on this topic. It then critically evaluates the cross-country evidence on the effect of product market regulation on mark- ups, firm dynamics, investment, employment, innovation, productivity and output growth. A summary of what we learn from the econometric results concludes the paper. Series: Boston College Working Papers in Economics Number: 623 Creation-Date: 20050928 Revision-Date: 20080804 Length: 46 pages Keywords: Regulation, Product Market, Performance, Productivity, Innovation, Growth Classification-JEL: D24, K20, L10, L51,O31,O40,O57 File-URL: http://fmwww.bc.edu/EC-P/wp623.pdf File-Format: application/pdf File-Size: 204 Kb File-Function: main text Handle: RePEc:boc:bocoec:623 Template-Type: ReDIF-Paper 1.0 Title: School Choice: An Experimental Study Author-Name: Yan Chen Author-X-Name-First: Yan Author-X-Name-Last: Chen Author-WorkPlace-Name: University of Michigan - Ann Arbor Author-Name: Tayfun Sönmez Author-X-Name-First: Tayfun Author-X-Name-Last: Sönmez Author-Email: sonmezt@bc.edu Author-Person: psi57 Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: We present an experimental study of three school choice mechanisms. The Boston mechanism is influential in practice, while the two alternative mechanisms, the Gale-Shapley and Top Trading Cycles mechanisms, have superior theoretical properties in terms of incentives and efficiency. Consistent with theory, this study indicates a high preference manipulation rate under the Boston mechanism. As a result, efficiency under Boston is significantly lower than that of the two competing mechanisms in the designed environment. However, contrary to theory, Gale-Shapley outperforms the Top Trading Cycles mechanism and generates the highest efficiency. Our results suggest that replacing the Boston mechanism with either Gale-Shapley or Top Trading Cycles mechanism might significantly improve efficiency, however, the efficiency gains are likely to be more profound when parents are educated about the incentive compatibility of these mechanisms. Series: Boston College Working Papers in Economics Number: 622 Creation-Date: 20041020 Length: 46 pages Keywords: school choice, Boston mechanism, mechanism design, Gale-Shapley mechanism, Top Trading Cycles mechanism Classification-JEL: C78, C92, D82 Publication-Status: forthcoming, Journal of Economic Theory File-URL: http://fmwww.bc.edu/EC-P/wp622.pdf File-Format: application/pdf File-Size: 196 Kb File-Function: main text Handle: RePEc:boc:bocoec:622 Template-Type: ReDIF-Paper 1.0 Title: Efficient Kidney Exchange: Coincidence of Wants in a Structured Market Author-Name: Alvin E. Roth Author-X-Name-First: Alvin Author-X-Name-Last: Roth Author-Workplace-Name: Harvard University Author-Name: Tayfun Sönmez Author-X-Name-First: Tayfun Author-X-Name-Last: Sönmez Author-Email: sonmezt@bc.edu Author-Person: psi57 Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: M. Utku Ünver Author-X-Name-First: M. Author-X-Name-Last: Ünver Author-WorkPlace-Name: Koç University Abstract: Patients needing kidney transplants may have willing donors who cannot donate to them because of blood or tissue incompatibility. Incompatible patient-donor pairs can exchange donor kidneys with other such pairs. The situation facing such pairs resem- bles models of the double coincidence of wants, and relatively few exchanges have been consummated by decentralized means. As the population of available patient-donor pairs grows, the frequency with which exchanges can be arranged will depend in part on how exchanges are organized. We study the potential frequency of exchanges as a function of the number of patient-donor pairs, and the size of the largest feasible exchange. Developing infrastructure to identify and perform 3-way as well as 2-way exchanges will have a substantial effect on the number of transplants, and will help the most vulnerable patients. Larger than 3-way exchanges have much smaller impact. Larger populations of patient-donor pairs increase the percentage of patients of all kinds who can find exchanges. Series: Boston College Working Papers in Economics Number: 621 Creation-Date: 20050523 Length: 27 pages Keywords: efficient exchange, transplants, double coincidence of wants Publication-Status: published as "Efficient Kidney Exchange: Coincidence of Wants in Markets with Compatibility-Based Preferences", American Economic Review, 97(3): 828-851, 2007. Classification-JEL: C78, D02, D63, I10 File-URL: http://fmwww.bc.edu/EC-P/wp621.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:621 Template-Type: ReDIF-Paper 1.0 Title: Pairwise Kidney Exchange Author-Name: Alvin E. Roth Author-X-Name-First: Alvin Author-X-Name-Last: Roth Author-Workplace-Name: Harvard University Author-Name: Tayfun Sönmez Author-X-Name-First: Tayfun Author-X-Name-Last: Sönmez Author-Email: sonmezt@bc.edu Author-Person: psi57 Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: M. Utku Ünver Author-X-Name-First: M. Author-X-Name-Last: Ünver Author-WorkPlace-Name: Koç University Abstract: In connection with an earlier paper on the exchange of live donor kidneys (Roth, Sönmez, and Ünver 2004) the authors entered into discussions with New England transplant surgeons and their colleagues in the transplant community, aimed at implementing a Kidney Exchange program. In the course of those discussions it became clear that a likely first step will be to implement pairwise exchanges, between just two patient-donor pairs, as these are logistically simpler than exchanges involving more than two pairs. Furthermore, the experience of these surgeons suggests to them that patient and surgeon preferences over kidneys should be 0-1, i.e. that patients and surgeons should be indifferent among kidneys from healthy donors whose kidneys are compatible with the patient. This is because, in the United States, transplants of compatible live kidneys have about equal graft survival probabilities, regardless of the closeness of tissue types between patient and donor (unless there is a rare perfect match). In the present paper we show that, although the pairwise constraint eliminates some potential exchanges, there is a wide class of constrained-efficient mechanisms that are strategy-proof when patient- donor pairs and surgeons have 0-1 preferences. This class of mechanisms includes deterministic mechanisms that would accomodate the kinds of priority setting that organ banks currently use for the allocation of cadaver organs, as well as stochastic mechanisms that allow considerations of distributive justice to be addressed. Series: Boston College Working Papers in Economics Number: 620 Creation-Date: 20040804 Length: 49 pages Keywords: pairwise exchanges, transplants Classification-JEL: C78, D02, D63, I10 Publication-Status: published, Journal of Economic Theory, 125: 151-188, 2005. File-URL: http://fmwww.bc.edu/EC-P/wp620.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:620 Template-Type: ReDIF-Paper 1.0 Title: Games of School Choice under the Boston Mechanism Author-Name: Haluk Ergin Author-X-Name-First: Haluk Author-X-Name-Last: Ergin Author-WorkPlace-Name: MIT Author-Name: Tayfun Sönmez Author-X-Name-First: Tayfun Author-X-Name-Last: Sönmez Author-Email: sonmezt@bc.edu Author-Person: psi57 Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: Many school districts in the U.S. use a student assignment mechanism that we refer to as the Boston mechanism. Under this mechanism a student loses his priority at a school unless his parents rank it as their first choice. Therefore parents are given incentives to rank high on their list the schools where the student has a good chance of getting in. We characterize the Nash equilibria of the induced preference revelation game. An important policy implication of our result is that a transition from the Boston mechanism to the student-optimal stable mechanism would lead to unambiguous efficiency gains. Series: Boston College Working Papers in Economics Number: 619 Creation-Date: 20050912 Keywords: student assignment, Boston mechanism, induced preference revelation, mechanism design Classification-JEL: C78, D61, D78, I20 Publication-Status: forthcoming, Journal of Public Economics File-URL: http://fmwww.bc.edu/EC-P/wp619.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:619 Template-Type: ReDIF-Paper 1.0 Title: Course Bidding at Business Schools Author-Name: Tayfun Sönmez Author-X-Name-First: Tayfun Author-X-Name-Last: Sönmez Author-Email: sonmezt@bc.edu Author-Person: psi57 Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: M. Utku Ünver Author-X-Name-First: M. Author-X-Name-Last: Ünver Author-WorkPlace-Name: Koç University Abstract: Mechanisms that rely on course bidding are widely used at Business Schools in order to allocate seats at oversubscribed courses. Bids play two key roles under these mechanisms: Bids are used to infer student preferences and bids are used to determine who have bigger claims on course seats. We show that these two roles may easily conflict and preferences induced from bids may significantly differ from the true preferences. Therefore while these mechanisms are promoted as market mechanisms, they do not necessarily yield market outcomes. The two conflicting roles of bids is a potential source of efficiency loss part of which can be avoided simply by asking students to state their preferences in addition to bidding and thus separating the two roles of the bids. While there may be multiple market outcomes under this proposal, there is a market outcome which Pareto dominates any other market outcome. Series: Boston College Working Papers in Economics Number: 618 Creation-Date: 20050912 Length: 31 pages Keywords: bidding, preferences, mechanism design Classification-JEL: C78, D78 File-URL: http://fmwww.bc.edu/EC-P/wp618.pdf File-Format: application/pdf File-Size: 288 Kb File-Function: main text Handle: RePEc:boc:bocoec:618 Template-Type: ReDIF-Paper 1.0 Title: Costs of Taxation and the Benefits of Public Goods: The Role of Income Effects Author-Name: Will Martin Author-Workplace-Name: World Bank Author-Email: wmartin1@worldbank.org Author-Name: James E. Anderson Author-X-Name-First: James Author-X-Name-Last: Anderson Author-Person: pan2 Author-Email: anderson@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: The fact that raising taxes can increase taxed labor supply through income effects is frequently used to justify very much lower measures of the marginal welfare cost of taxes and greater public good provision than indicated by traditional, compensated analyses. We confirm that this difference remains substantial with newer elasticity estimates, but show that either compensated or uncompensated measures of the marginal cost of funds can be used to evaluate the costs of taxation– and will provide the same result– as long as the income effects of both taxes and public good provision are incorporated in a consistent manner. Series: Boston College Working Papers in Economics Number: 617 Creation-Date: 20050908 Length: 27 pages Keywords: fiscal policy; second best; public goods; distortions; costs of taxation, marginal cost of funds; marginal excess burden, thought experiment. Classification-JEL: D61, F11, H21, H43 File-URL: http://fmwww.bc.edu/EC-P/wp617.pdf File-Format: application/pdf File-Size: 112 Kb File-Function: main text Handle: RePEc:boc:bocoec:617 Template-Type: ReDIF-Paper 1.0 Title: Objective Subjective Probabilities Author-Name: Kim C. Border Author-X-Name-First: Kim Author-X-Name-Last: Border Author-Workplace-Name: California Institute of Technology Author-Name: Paolo Ghirardato Author-X-Name-First: Paolo Author-X-Name-Last: Ghirardato Author-Workplace-Name: Università da Torino Author-Name: Uzi Segal Author-X-Name-First: Uzi Author-X-Name-Last: Segal Author-Person: pse40 Author-Email: uzi.segal@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Series: Boston College Working Papers in Economics Number: 616 Abstract: This note shows that if the space of events is sufficiently rich and the subjective probability function of each individual is non-atomic, then there is a sigma-algebra of events over which everyone will have the same probability function, and moreover, the range of these probabilities is the whole [0, 1] segment. Creation-Date: 20050802 Revision-Date: 20051207 Length: 6 pages Classification-JEL: Keywords: File-URL: http://fmwww.bc.edu/EC-P/wp616.pdf File-Format: application/pdf File-Size: 148 Kb File-Function: main text Handle: RePEc:boc:bocoec:616 Template-Type: ReDIF-Paper 1.0 Title: Ambiguity Aversion and the Criminal Process Author-Name: Uzi Segal Author-X-Name-First: Uzi Author-X-Name-Last: Segal Author-Person: pse40 Author-Email: uzi.segal@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Alex Stein Author-X-Name-First: Alex Author-X-Name-Last: Stein Author-Workplace-Name: Benjamin N. Cardoso School of Law Series: Boston College Working Papers in Economics Number: 615 Abstract: This is the first article to examine the effects of ambiguity aversion on the criminal process. Ambiguity aversion is a person’s rational attitude towards probability's indeterminacy. When a person is averse towards such ambiguities, he increases the probability of the unfavorable outcome to reflect that fear. This observation is particularly true about a criminal defendant who faces a jury trial. Neither the defendant nor the prosecution knows whether the jury will convict the defendant. Their best estimation relies on a highly generalized probability that attaches to a broad category of similar cases. The prosecution, as a repeat player, is predominantly interested in the conviction rate that it achieves over a long series of cases. It therefore can depend on this general probability as an adequate predictor of this rate. The defendant only cares about his individual case and cannot depend on this general probability. From the defendant's perspective, his individual probability of conviction is ambiguous. The defendant consequently increases this probability to reflect his fear of that ambiguity. Because most defendants are ambiguity-averse, while the prosecution is not, the criminal process systematically involves and is thoroughly affected by asymmetric ambiguity-aversion. Creation-Date: 20050802 Revision-Date: 20060727 Length: 55 pages Classification-JEL: Keywords: File-URL: http://fmwww.bc.edu/EC-P/wp615.pdf File-Format: application/pdf File-Size: 453 Kb File-Function: main text Handle: RePEc:boc:bocoec:615 Template-Type: ReDIF-Paper 1.0 Title: Referrals in Search Markets Author-Name: Maria Arbatskaya Author-X-Name-First: Maria Author-X-Name-Last: Arbatskaya Author-Workplace-Name: Emory University Author-Name: Hideo Konishi Author-X-Name-First: Hideo Author-X-Name-Last: Konishi Author-Person: pko35 Author-Email: konishih@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Series: Boston College Working Papers in Economics Number: 614 Abstract: This paper compares the equilibrium outcomes in search markets with and without referrals. Although it seems clear that consumers would benefit from referrals, it is not at all clear whether firms would unilaterally provide information about competing offers since such information could encourage consumers to purchase the product elsewhere. In a model of a horizontally differentiated product market with sequential consumer search, we show that valuable referrals can arise in the equilibrium: a firm will give referrals to consumers whose ideal product is suffciently far from the firms offering. We allow firms to price-discriminate among consumers, and consumers to misrepresent their tastes. It is found that the equilibrium profits tend to be higher in markets with referrals than in the ones without. Consumers tend to be better o¤ in the presence of referrals when search costs are not too low, and under a certain parameter range, referrals lead to a Pareto improvement. Keywords: horizontal referrals, consumer search, information, matching, broker commission. Classification-JEL: C7,D4,D8,L1 Publication-Status: forthcoming, International Journal of Industrial Organization Creation-Date: 20050727 Revision-Date: 20110510 File-URL: http://fmwww.bc.edu/EC-P/wp614.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:614 Template-Type: ReDIF-Paper 1.0 Title: Simple Endogenous Binary Choice and Selection Panel Model Estimators Author-Name: Arthur Lewbel Author-X-Name-First:Arthur Author-X-Name-Last: Lewbel Author-Person: ple43 Author-Email: lewbel@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: This paper provides numerically trivial estimators for short panels of either binary choices or of linear models that suffer from confounded, nonignorable sample selection. The estimators allow for fixed effects, endogenous regressors, lagged dependent variables, and heterokedastic errors with unknown distribution. The estimators, which converge at rate root n, are based on variants of the Honoré and Lewbel (2002) panel binary choice model and Lewbel's (2005) cross section sample selection model. Keywords: Panel Data, Fixed Effects, Binary Choice, Binomial Response, Sample Selection, Treatment, Semiparametric, Latent Variable, Predetermined Regressors, Lagged Dependent Variable, Endogeneity, Instrumental Variable. Classification-JEL: Series: Boston College Working Papers in Economics Number: 613 Creation-Date: 20050201 Revision-Date: 20060904 Length: 16 pages File-URL: http://fmwww.bc.edu/EC-P/wp613.pdf File-Format: application/pdf File-Size: 210 Kb File-Function: main text Handle: RePEc:boc:bocoec:613 Template-Type: ReDIF-Paper 1.0 Title: A little bit of Stata programming goes a long way... Author-Name: Christopher F. Baum Author-X-Name-First: Christopher Author-X-Name-Last: Baum Author-Person: pba1 Author-Email: baum@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Workplace-Name: DIW Berlin Abstract: This tutorial will discuss a number of elementary Stata programming constructs and discuss how they may be used to automate and robustify common data manipulation, estimation and graphics tasks. Those used to the syntax of other statistical packages or programming languages must adopt a different mindset when working with Stata to take full advantage of its capabilities. Some of Stata's most useful commands for handling repetitive tasks: -forvalues-, -foreach-, -egen-, -local- and -matrix- are commonly underutilized by users unacquainted with their power and ease of use. While relatively few users may develop ado-files for circulation to the user community, nearly all will benefit from learning the rudiments of use of the -program-, -syntax- and -return- statements when they are faced with the need to perform repetitive analyses. Worked examples making use of these commands will be presented and discussed in the tutorial. Keywords: Stata, macros, foreach, forvalues, egen, matrix, program, syntax, return Series: Boston College Working Papers in Economics Number: 612 Creation-Date: 20050608 Classification-JEL: C22, C87 File-URL: http://fmwww.bc.edu/EC-P/wp612.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:612 Template-Type: ReDIF-Paper 1.0 Title: Downward Nominal Wage Flexibility: Real or Measurement Error? Author-Name: Peter Gottschalk Author-X-Name-First: Peter Author-X-Name-Last: Gottschalk Author-Email: peter.gottschalk@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Series: Boston College Working Papers in Economics Number: 611 Abstract: This paper presents a new method to correct for measurement error in wage data and applies this method to address an old question. How much downward wage flexibility is there in the U.S? We apply standard methods developed by Bai and Perron (1998b) to identify structural breaks in time series data. Applying these methods to wage histories allows us to identify when each person experienced a change in nominal wages. The length of the period of constant nominal wages is left unrestricted and is allowed to differ across individuals, as is the size and direction of the nominal wage change. We apply these methods to data from the Survey of Income and Program Participation. The evidence we provide indicates that the probability of a cut in nominal wages is substantially overstated in data that is not corrected for measurement error. Creation-Date: 20041031 Length: 28 pages Keywords: nominal wage rigidity, measurement error Classification-JEL: J38 Note: This paper is also available as IZA Discussion Paper No. 1327 Publication-Status: published, Review of Economics and Statistics, 87:3, 556-568, 2005 File-URL: http://fmwww.bc.edu/EC-P/wp611.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:611 Template-Type: ReDIF-Paper 1.0 Title: Advertising in Specialized Markets: Example from the US Pharmaceutical Industry Author-Name: Amrita Bhattacharyya Author-X-Name-First: Amrita Author-X-Name-Last: Bhattacharyya Author-Email: bhattaam@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Series: Boston College Working Papers in Economics Number: 610 Abstract: This paper studies the usefulness of advertising to both consumers and experts in specialized markets like the prescription drugs, travel and real-estate markets where the consumers' purchasing decisions are influenced by the experts (e.g., doctors, travel agents and real-estate agents). Inspired by the features of the prescription drugs market the study shows that direct-to-consumer-advertising (DTCA) does not substitute for advertising directed to physicians even when physician-advertising is only persuasive in nature. Furthermore, the paper analyzes possible advertising equilibriums in a two-firm setting and finds that it is possible to have a sub-game perfect, non-symmetric Nash Equilibrium in which only one firm advertises to the consumers and the other firm becomes a free-rider when, (i) the number of patients who are aware of treatment is very low, and (ii) there are very few patients who insist on a particular drug. Otherwise, for familiar diseases a non-advertising equilibrium is most likely. Finally, consumer advertising can have welfare improving implications depending on the disease types and patient characteristics. Keywords: advertising, DTCA, prescription, expert, Nash equilibrium Classification-JEL: L0, M3, I0 Note: previously circulated as "Advertising in Specialized Markets: Example from the US Pharmaceutical Industry" Creation-Date: 20050228 Revision-Date: 20051110 Length: 26 pages File-URL: http://fmwww.bc.edu/EC-P/wp610.pdf File-Format: application/pdf File-Size: 266 Kb File-Function: main text Handle: RePEc:boc:bocoec:610 Template-Type: ReDIF-Paper 1.0 Title: Smart Café Cities: Testing Human Capital Externalities in the Boston Metropolitan Area Author-Name: Shihe Fu Author-X-Name-First: Shihe Author-X-Name-Last: Fu Author-Email: fush@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Series: Boston College Working Papers in Economics Number: 609 Abstract: Existing studies have explored either only one or two of the mechanisms that human capital externalities percolate at only macrogeographic levels. This paper, by using the 1990 Massachusetts census data, tests four mechanisms at the microgeographic levels in the Boston metropolitan area labor market. We propose that individual workers can learn from their occupational and industrial peers in the same local labor market through four channels: depth of human capital stock, Marshallian labor market externalities, Jacobs labor market externalities, and thickness of the local labor market. We find that all types of human capital externalities are significant across census tracts and blocks. Marshallian labor market externalities and the effect of labor market thickness in terms of industry employment density are significant at the block level. The mechanisms of knowledge spillovers vary across industries and occupations. Different types of externalities attenuate at different speeds over geographic distances. The effect of labor market thickness -- in terms of industry employment density -- decays rapidly beyond 1.5 miles away from block centroid; the effect of human capital depth decays rapidly beyond three miles; while Jacobs externalities decay very slowly, indicating a certain degree of urbanization economies. We conclude that knowledge spillovers are very localized within microgeographic scope in cities that we call, "Smart Cafe Cities." Keywords: human capital, externalities, labor markets Classification-JEL: C21, R23, J24 Creation-Date: 20050207 Length: 38 pages File-URL: http://fmwww.bc.edu/EC-P/wp609.pdf File-Format: application/pdf File-Size: 177 Kb File-Function: main text Handle: RePEc:boc:bocoec:609 Template-Type: ReDIF-Paper 1.0 Title: An Integrated Model of Downtown Parking and Traffic Congestion Author-Name: Richard Arnott Author-X-Name-First: Richard Author-X-Name-Last: Arnott Author-Person: par13 Author-Email: arnottr@bc.edu Author-Name: Eren Inci Author-X-Name-First: Eren Author-X-Name-Last: Inci Author-Person: pin10 Author-Email: inci@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Series: Boston College Working Papers in Economics Number: 608 Abstract: This paper presents a downtown parking model that integrates traffic congestion and saturated on-street parking. We assume that the stock of cars cruising for parking adds to traffic congestion. Two major results come out from the model, one of which is robust. The robust one is that, whether or not the amount of on-street parking is optimal, it is efficient to raise the on-street parking fee to the point where cruising for parking is eliminated without parking becoming unsaturated. The other is that, if the parking fee is fixed at a sub-optimal level, it is second-best optimal to increase the amount of curbside allocated to parking until cruising for parking is eliminated without parking becoming unsaturated. Keywords:traffic congestion, cruising for parking, on-street parking Classification-JEL: R41 Creation-Date: 20050201 Length: 32 pages Publication-Status: published, Journal of Urban Economics, 60, 418-442, 2006. File-URL: http://fmwww.bc.edu/EC-P/wp608.pdf File-Format: application/pdf File-Size: 402 Kb File-Function: main text Handle: RePEc:boc:bocoec:608 Template-Type: ReDIF-Paper 1.0 Title: Changes in the Federal Reserve’s Inflation Target: Causes and Consequences Author-Name: Peter N. Ireland Author-X-Name-First: Peter Author-X-Name-Last: Ireland Author-Person: pir1 Author-Email: peter.ireland@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Abstract: This paper estimates a New Keynesian model to draw inferences about the behavior of the Federal Reserve’s unobserved inflation target. The results indicate that the target rose from 1 1/4 percent in 1959 to over 8 percent in the mid-to-late 1970s before falling back below 2 1/2 percent in 2004. The results also provide some support for the hypothesis that over the entire postwar period, Federal Reserve policy has systematically translated short-run price pressures set off by supply-side shocks into more persistent movements in inflation itself, although considerable uncertainty remains about the true source of shifts in the inflation target. Classification-JEL: E31, E32, E52. Keywords: inflation target, new Keynesian model, supply shocks, inflation Series: Boston College Working Papers in Economics Number: 607 Creation-Date: 20050114 File-URL: http://fmwww.bc.edu/EC-P/wp607.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:607 Template-Type: ReDIF-Paper 1.0 Title: Free Trade Networks with Transfers Author-Name: Taiji Furusawa Author-X-Name-First: Taiji Author-X-Name-Last: Furusawa Author-Workplace-Name: Hitotsubashi University Author-Name: Hideo Konishi Author-X-Name-First: Hideo Author-X-Name-Last: Konishi Author-Person: pko35 Author-Email: konishih@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Series: Boston College Working Papers in Economics Number: 606 Abstract: The paper investigates the network of bilateral free trade agreements (FTA) in the context of a network formation game with transfers. Furusawa and Konishi (2002) show that without international transfers, countries with different industrialization levels may not sign an FTA, so that the global free trade network, in which every pair of countries sign an FTA, is not pairwise stable in general. We show in this paper that even if the world consists of fairly asymmetric countries, the global free trade network is pairwise stable when transfers between FTA signatories are allowed. Moreover, it is the unique pairwise stable network unless industrial commodities are highly substitutable from one another. Keywords: Free Trade Agreements, Network Formation Game, Transfers Classification-JEL: F15 Publication-Status: published, Japanese Economic Review, 56, 144-164, 2005. Creation-Date: 20041029 Revision-Date: 20050119 File-URL: http://fmwww.bc.edu/EC-P/wp606.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:606 Template-Type: ReDIF-Paper 1.0 Title: Private Transfers within the Family: Mothers, Fathers, Sons and Daughters Author-Name: Donald Cox Author-X-Name-First: Donald Author-X-Name-Last: Cox Author-Person: pco32 Author-Email: donald.cox.1@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Series: Boston College Working Papers in Economics Number: 605 Abstract: Despite recent advances in data collection and the growing number of empirical studies that examine private intergenerational transfers, there still exist significant gaps in our knowledge. Who transfers what to whom, and why do they it? I argue that some of these gaps could be filled by departing from the standard parent-child framework and concentrating instead on fathers, mothers, sons and daughters in a way that accounts for fundamental--and sometimes obvious--male-female differences in concerns and objectives in family life. Elementary sex differences in reproductive biology constitute the basic building blocks of studies of family behavior in many disciplines, but despite recent progress they get far less attention than they deserve in economic studies of the family. I explore, separately, the implications of three basic biological facts for intergenerational transfer behavior. The first is paternity uncertainty: how does it affect the incentives of fathers, mothers and of various grandparents to invest in children? The second is differing reproductive prospects of sons versus daughters: when are sons a better investment than daughters and vice versa? The third is conflict: How much acrimony might we expect to occur in families, and why? In examining these issues I also explore household survey data from the United States. This preliminary evidence is consistent with non-biological as well as biological explanations of behavior. Nonetheless, the biological focus confers two advantages, by generating falsifiable predictions and by illuminating new avenues for empirical work. There is enormous potential for further micro-data-based empirical work in this area. Creation-Date: 20031231 Classification-JEL: D10, D13, D64, J12, J18, B52 Keywords: Private transfers, gender, biology, evolution, conflict, public transfers, social security, marriage, children, family. Publication-Status: published in Alicia H. Munnell and Annika Sunden, eds., Death and Dollars: The Role of Gifts and Bequests in America, (c) 2003 by The Brookings Institution. File-URL: http://fmwww.bc.edu/EC-P/wp605.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:605 Template-Type: ReDIF-Paper 1.0 Title: A Model of R&D Tax Incentives Author-Name: Eren Inci Author-X-Name-First: Eren Author-X-Name-Last: Inci Author-Person: pin10 Author-Email: inci@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Series: Boston College Working Papers in Economics Number: 597 Abstract: This paper examines R&D tax incentives in oligopolistic markets. We characterize the conditions under which tax incentives reach the socially desirable level of firm-financed R&D spending. The outcome of the market depends not only on the level of technological spillover in the industry but also on the degree of strategic interaction between the firms. One major result emerges from the model: The socially desirable level of R&D investment is not necessarily reached by subsidizing R&D. When the sector spillover is sufficiently low, the government might want to tax R&D investments, and this result does not necessarily arise because firms are overinvesting in R&D. There are also cases in which an R&D tax is desirable even though firms are underinvesting in R&D compared with the first-best optimum. In practice, this theoretical finding calls for a lower sales tax combined with an R&D subsidy in oligopolistic industries with high technological spillovers, and a lower sales tax combined with an R&D tax in oligopolistic industries with low technological spillovers. Keywords: R&D tax incentive; social policy, oligopoly, spillover Classification-JEL: H25; L13; O32 Creation-Date: 20040714 Revision-Date: 20061009 Publication-Status: published, International Tax and Public Finance, 16, 797-821, 2009. File-URL: http://fmwww.bc.edu/EC-P/wp597.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:597 Template-Type: ReDIF-Paper 1.0 Title: Screening Ethics when Honest Agents Keep their Word Author-Name: Ingela Alger Author-X-Name-First: Ingela Author-X-Name-Last: Alger Author-Person: pal24 Author-Email: ingela.alger@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Regis Renault Author-X-Name-First: Regis Author-X-Name-Last: Renault Author-Email: regis.renault@econ.unicaen.fr Author-WorkPlace-Name: GEMMA, Université de Caen Series: Boston College Working Papers in Economics Number: 562 Abstract: We study the implications of honesty when it requires pre-commitment. Within a two-period hidden information problem, an agent learns his match with the assigned task in period 2 and, if honest, reveals it to the principal if he has committed to it. The principal may offer a menu of contracts to screen ethics. Both honest and dishonest agents are willing to misrepresent their ethics. The principal and dishonest agents benefit from an increased likelihood of honesty as long as honesty is likely enough. Honest agents always profit from ethics uncertainty if a good match is likely. This is also true if dishonesty is likely enough, in which case an honest receives the same surplus as a dishonest. Keywords: ethics, honesty, loyalty, adverse selection, screening Classification-JEL: D82 Creation-Date: 20030615 Revision-Date: 20041109 File-URL: http://fmwww.bc.edu/EC-P/wp562.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:562 Template-Type: ReDIF-Paper 1.0 Title: A Theory of Fraud and Over-Consumption in Experts Markets Author-Name: Ingela Alger Author-X-Name-First: Ingela Author-X-Name-Last: Alger Author-Person: pal24 Author-Email: ingela.alger@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Francois Salanie Author-X-Name-First: Francois Author-X-Name-Last: Salanie Author-Email: salanie@toulouse.inra.fr Author-WorkPlace-Name: INRA-LEERNA, Toulouse Abstract: Consumers often have to rely on an expert's diagnosis to assess their needs. If the expert is also the seller of services, he may use his informational advantage to induce over-consumption. Empirical evidence suggests that over-consumption is a pervasive phenomenon in experts markets. We prove the existence of equilibrium over-consumption in an otherwise purely competitive model. This market failure results from the freedom of consumers to turn down an expert's recommendation: experts defraud consumers in order to keep them uninformed, as this deters them from seeking a better price elsewhere. Our model also yields predictions on the diagnosis price that are in line with stylized facts, and provides a theory for why risk-neutral consumers would demand extended warranties on durables. Series: Boston College Working Papers in Economics Number: 495 Creation-Date: 20010401 Revision-Date: 20041109 Note: This paper was previously circulated as "Competitive Pricing of Expert Services: Equilibrium Fraud and Partial Specialization" Classification-JEL:D41, D82, L11 Keywords:experts, fraud, over-consumption, extended warranties File-URL: http://fmwww.bc.edu/EC-P/wp495.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:495 Template-Type: ReDIF-Paper 1.0 Title: Screening Ethics when Honest Agents Care about Fairness Author-Name: Ingela Alger Author-X-Name-First: Ingela Author-X-Name-Last: Alger Author-Person: pal24 Author-Email: ingela.alger@bc.edu Author-WorkPlace-Name: Boston College Author-WorkPlace-Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA Author-Name: Regis Renault Author-X-Name-First: Regis Author-X-Name-Last: Renault Author-Email: regis.renault@econ.unicaen.fr Author-WorkPlace-Name: GEMMA, Université de Caen Series: Boston College Working Papers in Economics Number: 489 Abstract: We explore the potential for discriminating between honest and dishonest agents, when a principal faces an agent with private information about the circumstances of the exchange (good or bad). When honest agents reveal circumstances truthfully independently of the contract offered, the principal leaves a rent only to dishonest agents (even if honest agents are willing to lie about their ethics); the principal is able to screen between good and bad circumstances. In contrast, if honest behavior is conditional on the contract being fair, the principal cannot screen along the ethics dimension. If the probability that the agent is dishonest is large, the optimal mechanism is as if the agent were dishonest with certainty (standard second best). Otherwise, it is as if the agent were honest with certainty (first best). In the latter case, the principal is unable to screen between circumstances if the agent is dishonest. Creation-Date: 20001130 Revision-Date: 20041109 Note: This paper was previously circulated as "Screening among Agents with Heterogeneous Ethics". Classification-JEL:D82 Keywords: ethics, honesty, adverse selection, screening File-URL: http://fmwww.bc.edu/EC-P/wp489.pdf File-Format: application/pdf File-Function: main text Handle: RePEc:boc:bocoec:489