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Intergenerational Mobility and the Informative Content of Surnames
Get PDFWe propose a new methodology for measuring intergenerational mobility in economic wellbeing.
Our method is based on the joint distribution of surnames and economic outcomes.
It circumvents the need for intergenerational panel data, a long-standing stumbling block
for understanding mobility. A single cross-sectional dataset is su cient. Our main idea
is simple. If `inheritance' is important for economic outcomes, then rare surnames should
predict economic outcomes in the cross-section. This is because rare surnames are indicative
of familial linkages. Of course, if the number of rare surnames is small, this won't work. But
rare surnames are abundant in the highly-skewed nature of surname distributions from most
Western societies. We develop a model that articulates this idea and shows that the more
important is inheritance, the more informative will be surnames. This result is robust to
a variety of di erent assumptions about fertility and mating. We apply our method using
the 2001 census from Catalonia, a large region of Spain. We use educational attainment as
a proxy for overall economic well-being. Our main nding is that mobility has decreased
among the di erent generations of the 20th century. A complementary analysis based on
sibling correlations con rms our results and provides a robustness check on our method. Our
model and our data allow us to examine one possible explanation for the observed decrease
in mobility. We nd that the degree of assortative mating has increased over time. Overall,
we argue that our method has promise because it can tap the vast mines of census data that
are available in a heretofore unexploited manner
Nominal Stability and Financial Globalization
Get PDFOver the past four decades, advanced economies experienced a large growth in
gross external portfolio positions. This phenomenon has been described as Financial
Globalization. Over roughly the same time frame, most of these countries also saw a
substantial fall in the level and variability of inflation. Many economists have conjectured
that financial globalization contributed to the improved performance in the level
and predictability of inflation. In this paper, we explore the causal link running in
the opposite direction. We show that a monetary policy rule which reduces inflation
variability leads to an increase in the size of gross external positions, both in equity
and bond portfolios. This appears to be a robust prediction of open economy macro
models with endogenous portfolio choice. It holds across different modeling specifications
and parameterizations. We also present preliminary empirical evidence which shows a negative relationship between inflation volatility and the size of gross external positions
News Shocks and Business Cycles: Bridging the Gap from Different Methodologies
Get PDFAn important disconnect in the news driven view of the business cycle formalized
by Beaudry and Portier (2004), is the lack of agreement between different—VAR
and DSGE—methodologies over the empirical plausibility of this view. We argue
that this disconnect can be largely resolved once we augment a standard DSGE
model with a financial channel that provides amplification to news shocks. Both
methodologies suggest news shocks to the future growth prospects of the economy to
be significant drivers of U.S. business cycles in the post-Greenspan era (1990-2011),
explaining as much as 50% of the forecast error variance in hours worked in cyclical
frequencie
The Impact of Information Provision on Agglomeration Bonus Performance: An Experimental Study on Local Networks
Get PDFThe Agglomeration Bonus (AB) is a mechanism to induce adjacent landowners to spatially coordinate their land use for the delivery of ecosystem services from farmland. This paper uses laboratory experiments to explore the performance of the AB in achieving the socially optimal land management configuration in a local network environment where the information available to subjects varies. The AB poses a coordination problem between two Nash equilibria: a Pareto dominant and a risk dominant equilibrium. The experiments indicate that if subjects are informed about both their direct and indirect neighbors’ actions, they are more likely to coordinate on the Pareto dominant equilibrium relative to the case where subjects have information about their direct neighbors’ action only. However, the extra information can only delay – and not prevent – the transition to the socially inferior risk dominant Nash equilibrium. In the long run, the AB mechanism may only be partially effective in enhancing delivery of ecosystem services on farming landscapes featuring local networks
Moral Hazard with Counterfeit Signals
Get PDFIn many moral hazard problems, the principal evaluates the agent's performance based on signals which the agent may suppress and replace with counterfeits. This form of fraud may affect the design of optimal contracts drastically, leading to complete
market failure in extreme cases. I show that in optimal contracts, the principal deters
all fraud, and does so by two complementary mechanisms. First, the principal punishes
signals that are suspicious, i.e. appear counterfeit. Second, the principal is lenient on bad signals that the agent could suppress, but does not
The Technological Specialization of Countries: An Analysis of Patent Data
Get PDFNew methods of analysis of patent statistics allow assessing country
profiles of technological specialization for the period 1990-2006. We
witness a modest decrease in levels of specialization, which we show to be
negatively influenced by country size and degree of internationalization of
inventive activities
Obesity and smoking: can we catch two birds with one tax?
Get PDFThe debate on tobacco and fat taxes often treats smoking and eating as independent behaviors. However, the available evidence shows that they are interdependent, which implies that policies against smoking or obesity may have larger scope than expected. To address this issue, we propose a dynamic rational model where eating and smoking are simultaneous choices that jointly affect body weight and addiction to smoking. Focusing on direct and cross-price effects, we compare tobacco taxes and food taxes and we show that a single policy tool can reduce both smoking and body weight. In particular, food taxes can be more effective than tobacco taxes at simultaneously fighting obesity and smoking
Changing Eating Habits - A Field Experiment in Primary Schools
Get PDFWe conduct a field experiment in 31 primary schools in England to test whether incentives to eat fruit and vegetables help children develop healthier habits. The intervention consists of rewarding children with stickers and little gifts for a period of four weeks for choosing a portion of fruit and vegetables at lunch. We compare the effects of two incentive schemes (competition and piece rate) on choices and consumption over the course of the intervention as well as once the incentives are removed and six months later. We find that the intervention had positive effects, but the effects vary substantially according to age and gender. However, we find little evidence of sustained long term effects, except for the children from poorer socio‐economic backgrounds
The Forward Premium Puzzle and The Euro
Get PDFThis paper evaluates the forward premium puzzle using the Euro exchange
rate. Unlike previous studies, our analysis utilizes time-varying parameter
methods and is based on two approaches for evaluation of the puzzle; the
traditional approach analyzing the sensitivity of interest rate differentials to
the forward premium, and the other looking into deviations from the covered
interest rate parity (CIRP) condition. Then we provide evidence that the
forward premium puzzle indeed became more prominent around the time of
the recent crisis periods such as the Lehman Shock and the Euro crisis. This
is also shown to be consistent with a deterioration in the CIRP
Contagious Illiquidity I: Contagion through Time
Get PDFThis paper is an investigation into the dynamics of asset markets with adverse
selection a la Akerlof (1970). The particular question asked is: can market failure at some
later date precipitate market failure at an earlier date? The answer is yes: there can be
"contagious illiquidity" from the future back to the present.
The mechanism works as follows. If the market is expected to break down in the
future, then agents holding assets they know to be lemons (assets with low returns) will
be forced to hold them for longer - they cannot quickly resell them. As a result, the
effective difference in payoff between a lemon and a good asset is greater. But it is
known from the static Akerlof model that the greater the payoff differential between
lemons and non-lemons, the more likely is the market to break down. Hence market
failure in the future is more likely to lead to market failure today.
Conversely, if the market is not anticipated to break down in the future, assets can be
readily sold and hence an agent discovering that his or her asset is a lemon can quickly
jettison it. In effect, there is little difference in payoff between a lemon and a good asset.
The logic of the static Akerlof model then runs the other way: the small payoff differential
is unlikely to lead to market breakdown today.
The conclusion of the paper is that the nature of today's market - liquid or illiquid -
hinges critically on the nature of tomorrow's market, which in turn depends on the next
day's, and so on. The tail wags the dog