Economics - Research Publications
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Early subjective completion beliefs and the demand for post-secondary education
We provide a comprehensive empirical analysis on the role of beliefs about the probability of completing post-secondary education, elicited before the end of secondary school, for students’ future education choices. Although there is substantial evidence on the relevance of subjective beliefs for returns to post-secondary education conditional on completion, there is little evidence linking early beliefs to the extensive margin of completing a degree. We exploit (i) a representative population sample which (ii) follows students over a long time horizon, two key features largely absent from the previous literature on subjective beliefs. We find that completion beliefs are mainly related to cognitive and non-cognitive skills, as opposed to family background or opportunities in the local labor market. Completion beliefs elicited before the end of secondary school are highly predictive for later key education outcomes, with a predictive accuracy comparable to an econometric model with perfect foresight. Assessing the heterogeneity of the relationship, our results imply that beliefs are most important for lower ability students and in times of tougher local labor markets.
feologit: A new command for fitting fixed-effects ordered logit models
(SAGE Publications, 2020-06)
In this article, we describe how to fit panel-data ordered logit models with fixed effects using the new community-contributed command feologit. Fixed-effects models are increasingly popular for estimating causal effects in the social sciences because they flexibly control for unobserved time-invariant heterogeneity. The ordered logit model is the standard model for ordered dependent variables, and this command is the first in Stata specifically for this model with fixed effects. The command includes a choice between two estimators, the blowup and cluster (BUC) estimator introduced in Baetschmann, Staub, and Winkelmann (2015, Journal of the Royal Statistical Society, Series A 178: 685–703) and the BUC- τ estimator in Baetschmann (2012, Economics Letters 115: 416–418). Baetschmann, Staub, and Winkelmann (2015) showed that the BUC estimator has good properties and is almost as efficient as more complex estimators such as generalized method-of-moments and empirical likelihood estimators. The command and model interpretations are illustrated with an analysis of the effect of parenthood on life satisfaction using data from the German Socio-Economic Panel. </jats:p>
Legalizing recreational cannabis use: a promising journey into the unknown
In order to evaluate the impact of the current legalization experiences, it is cru-cial to measure their efects both on public health and on users’ criminalization and contacts with illegal activities. The Uruguay-an cannabis regulation model is a middle-ground option between prohibition and commercialization, in which the govern-ment imposes strict regulations for users: mandatory registry, maximum amount of cannabis per user (40 g per month and 480 g per year), no advertisement, no selling to tourists, no edibles allowed. These restric-tions were planned to control consumption and accomplish the public health goal of the regulation.
The Samurai Bond: Credit Supply, Market Access, and Structural Transformation in Pre-War Japan
(Cambridge University Press (CUP), 2020-06-01)
While credit supply growth is associated with exacerbating financial crises, its impact on long-run growth is unclear. Market access similarly has ambiguous economic effects over time. Using regional variation in bond payments to samurai and the introduction of railways in nineteenth century Japan, we find that together they are associated with persistent redistributive effects between regions and sectors. Areas with higher bond value and railway access experienced tertiary sector growth and primary sector shrinkage, with analogous results in sectoral labor shares. This interaction between credit supply and market access facilitated structural transformation but had little long-run net growth impact.
On the Type I multivariate zero-truncated hurdle model with applications in health insurance
In the general insurance modeling literature, there has been a lot of work based on univariate zero-truncated models, but little has been done in the multivariate zero-truncation cases, for instance a line of insurance business with various classes of policies. There are three types of zero-truncation in the multivariate setting: only records with all zeros are missing, zero counts for one or some classes are missing, or zeros are completely missing for all classes. In this paper, we focus on the first case, the so-called Type I zero-truncation, and a new multivariate zero-truncated hurdle model is developed to study it. The key idea of developing such a model is to identify a stochastic representation for the underlying random variables, which enables us to use the EM algorithm to simplify the estimation procedure. This model is used to analyze a health insurance claims dataset that contains claim counts from different categories of claims without common zero observations.
Optimal implementation delay of taxation with trade-off for spectrally negative Lévy risk processes
(Springer Verlag, 2020-09-02)
In this paper we consider two cases of optimal implementation delay of taxation with trade-off under spectrally negative Lévy insurance risk processes. In the first case, we assume that the insurance company starts to pay tax only when its surplus level reaches a certain level, and at the termination time of the business there is a terminal value incurred to the company. A method is developed to determine the optimal starting-tax surplus level at which the total expected discounted value of all tax payments up to the termination time plus the discounted terminal value is maximized. In the second case, the company still pays tax subject to a starting-tax surplus level, but with capital injections to prevent bankruptcy. The total expected discounted value of tax payments minus the total discounted capital injection costs is maximized to determine the optimal starting-tax surplus level. Numerical examples are given at the end to illustrate the existence of positive optimal starting-tax surplus levels for both cases considered in this paper.
Integer game with delay
In this note, we study a version of a war of attrition, in which the players pick delays and the player with the longest delay wins. Unlike the war of attrition, all players have to experience the longest delay before the consumption takes place. We show that the game has no mixed strategy Nash equilibria. The game can be seen as a re-interpretation of the integer game, which is one of the most important and most criticized constructions in the full implementation literature. Unlike the integer game, it has a well-defined best response against any mixed strategy.
Economic Policy Uncertainty Spillovers in Booms and Busts
We estimate a nonlinear VAR to quantify the impact of US economic policy uncertainty shocks on the Canadian unemployment rate in booms and busts. We find strong evidence in favour of asymmetric spillover effects. Unemployment in Canada is shown to react more strongly to uncertainty shocks in economic busts. Such shocks explain about 13% of the variance of the 2‐year ahead forecast error of the Canadian unemployment rate in recessions vs. just 2% during economic booms. Counterfactual simulations point to a novel ‘economic policy uncertainty spillovers channel’. According to this channel, jumps in US uncertainty foster economic policy uncertainty in Canada in the first place and, because of the latter, lead to a temporary increase in the Canadian unemployment rate. Evidence of asymmetric spillover effects are also found for the UK economy, whose trade intensity with the US is low. This result is consistent with a transmission channel other than trade behind our findings.
The impact of voluntary front-of-pack nutrition labelling on packaged food reformulation: A difference-in-differences analysis of the Australasian Health Star Rating scheme
(Public Library of Science (PLoS), 2020-11-01)
Background Front-of-pack nutrition labelling (FoPL) of packaged foods can promote healthier diets. Australia and New Zealand (NZ) adopted the voluntary Health Star Rating (HSR) scheme in 2014. We studied the impact of voluntary adoption of HSR on food reformulation relative to unlabelled foods and examined differential impacts for more-versus-less healthy foods. Methods and findings Annual nutrition information panel data were collected for nonseasonal packaged foods sold in major supermarkets in Auckland from 2013 to 2019 and in Sydney from 2014 to 2018. The analysis sample covered 58,905 unique products over 14 major food groups. We used a difference-in-differences design to estimate reformulation associated with HSR adoption. Healthier products adopted HSR more than unhealthy products: >35% of products that achieved 4 or more stars displayed the label compared to <15% of products that achieved 2 stars or less. Products that adopted HSR were 6.5% and 10.7% more likely to increase their rating by ≥0.5 stars in Australia and NZ, respectively. Labelled products showed a −4.0% [95% confidence interval (CI): −6.4% to −1.7%, p = 0.001] relative decline in sodium content in NZ, and there was a −1.4% [95% CI: −2.7% to −0.0%, p = 0.045] sodium change in Australia. HSR adoption was associated with a −2.3% [−3.7% to −0.9%, p = 0.001] change in sugar content in NZ and a statistically insignificant −1.1% [−2.3% to 0.1%, p = 0.061] difference in Australia. Initially unhealthy products showed larger reformulation effects when adopting HSR than healthier products. No evidence of a change in protein or saturated fat content was observed. A limitation of our study is that results are not sales weighted. Thus, it is not able to assess changes in overall nutrient consumption that occur because of HSR-caused reformulation. Also, participation into labelling and reformulation is jointly determined by producers in this observational study, impacting its generalisability to settings with mandatory labelling. Conclusions In this study, we observed that reformulation changes following voluntary HSR labelling are small, but greater for initially unhealthy products. Initially unhealthy foods were, however, less likely to adopt HSR. Our results, therefore, suggest that mandatory labelling has the greatest potential for improving the healthiness of packaged foods.
The Boundary of the Market for Biosecurity Risk
Imported goods create value in destination countries but also create biosecurity risk. Although widely used in other domains of the economy, risk markets have not been created to manage losses that occur when exotic pests and diseases are introduced with traded goods. In this article we show that not all biosecurity risks are insurable. Losses arising from effort needed to detect and respond to exotic pests and diseases that breach national borders appear to be insurable because entry of these threats and consequent response costs, can be regarded as random events. As pests and diseases establish and spread, however, loss of access to export markets and productivity losses display systematic risk and appear to be uninsurable. Other insurability criteria support this definition of the boundary of biosecurity risk markets. We use the Australian biosecurity system as an example, although the framework described in this study will be applicable to biosecurity systems worldwide. We argue that biosecurity risk insurance could be incorporated into the current biosecurity system but would require legislation mandating importers to purchase insurance. Advantages of actuarial pricing of biosecurity risk are: (i) an increase in economic efficiency to the extent that importers respond to the price of biosecurity risk; (ii) financial sustainability would improve because actuarial pricing creates a structural link between funds available for biosecurity activities and risk exposure; and (iii) equity issues evident in the current biosecurity system could be addressed because risk creators (importers) would fund response activities through the purchase of insurance.
Seasonal Home Advantage in English Professional Football; 1974–2018
We study seasonal home advantage in English professional football over the period 1974 to 2018. We distinguish between absolute home advantage, enjoyed equally by all teams in a division, and relative home advantage, which differs among teams in the division. We find that absolute home advantage is substantial, ranging from 0.59 to 0.64 in terms of points per game or 0.44 to 0.46 in terms of goal difference. Likewise, clubs differ substantially in the relative home advantage they enjoy. Relative home advantage is positively related to within-team variation in attendance and the use of an artificial pitch. Despite big cross-divisional differences in attendance, absolute home advantage is about the same in all divisions. Finally, there is a substantial decline in absolute home advantage over time that materializes equally across divisions.
The joy of lottery play: evidence from a field experiment
(Springer (part of Springer Nature), 2020-12-01)
Buying lottery tickets is not a rational investment from a financial point of view. Yet, the majority of people participate at least once a year in a lottery. We conducted a field experiment to increase understanding of lottery participation. Using representative data for the Netherlands, we find that lottery participation increased the happiness of participants before the draw. Winning a small prize had no effect on happiness. Our results indicate that people may not only care about the outcomes of the lottery, but also enjoy the game. Accordingly, we conclude that lottery participation has a utility value in itself and part of the utility of a lottery ticket is consumed before the draw.