We explore the value of private investment information using data from a singular source: auctions of yearling racehorses. Horse breeders possess superior information about their own horses and have strong financial incentives to buy the best of these back at auction. However, those they repurchase subsequently perform significantly worse on average, earning 30% less at the racetrack than horses purchased by outsiders. Moreover, this underperformance is concentrated in male horses, despite these being purchased exclusively for racing purposes. These puzzling findings cannot be explained by differences in horse risk or breeder abilities, or by nonfinancial objectives, or by behavioral or selection biases. (JEL G02, G11, G14, L83, D44)
{"title":"Do Better Informed Investors Always Do Better? A Buyback Puzzle","authors":"G. Boyle, Gerald Ward","doi":"10.1111/ecin.12688","DOIUrl":"https://doi.org/10.1111/ecin.12688","url":null,"abstract":"We explore the value of private investment information using data from a singular source: auctions of yearling racehorses. Horse breeders possess superior information about their own horses and have strong financial incentives to buy the best of these back at auction. However, those they repurchase subsequently perform significantly worse on average, earning 30% less at the racetrack than horses purchased by outsiders. Moreover, this underperformance is concentrated in male horses, despite these being purchased exclusively for racing purposes. These puzzling findings cannot be explained by differences in horse risk or breeder abilities, or by nonfinancial objectives, or by behavioral or selection biases. (JEL G02, G11, G14, L83, D44)","PeriodicalId":11754,"journal":{"name":"ERN: Other Macroeconomics: Aggregative Models (Topic)","volume":"47 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2018-04-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"90485838","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
N. Gemmell, R. Kneller, Danny McGowan, Ismael Sanz, J. Sanz-Sanz
Firms that lie far behind the technological frontier have the most to gain from imitating the technology or management practices of others. That some firms converge relatively slowly to the productivity frontier suggests the existence of factors that cause them to underinvest in their productivity. In this paper we explore how far higher rates of corporate taxation affect firm productivity convergence by reducing the after tax returns to productivity enhancing investments for small firms. Using data for 11 European countries we find evidence for such an effect; productivity growth in small firms is slower the higher are corporate tax rates. Our results are robust to the use of instrumental variable and panel data techniques with quantitatively similar effects found from a natural experiment following the German tax reforms in 2001.
{"title":"Corporate Taxation and Productivity Catch‐Up: Evidence from European Firms","authors":"N. Gemmell, R. Kneller, Danny McGowan, Ismael Sanz, J. Sanz-Sanz","doi":"10.1111/sjoe.12212","DOIUrl":"https://doi.org/10.1111/sjoe.12212","url":null,"abstract":"Firms that lie far behind the technological frontier have the most to gain from imitating the technology or management practices of others. That some firms converge relatively slowly to the productivity frontier suggests the existence of factors that cause them to underinvest in their productivity. In this paper we explore how far higher rates of corporate taxation affect firm productivity convergence by reducing the after tax returns to productivity enhancing investments for small firms. Using data for 11 European countries we find evidence for such an effect; productivity growth in small firms is slower the higher are corporate tax rates. Our results are robust to the use of instrumental variable and panel data techniques with quantitatively similar effects found from a natural experiment following the German tax reforms in 2001.","PeriodicalId":11754,"journal":{"name":"ERN: Other Macroeconomics: Aggregative Models (Topic)","volume":"43 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2018-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"81511923","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Comments, questions, and answers about the future of Social Security.
关于社会保障未来的评论、问题和答案。
{"title":"Questions and Answers: The Future of Social Security","authors":"P. Diamond","doi":"10.1111/ECIN.12552","DOIUrl":"https://doi.org/10.1111/ECIN.12552","url":null,"abstract":"Comments, questions, and answers about the future of Social Security.","PeriodicalId":11754,"journal":{"name":"ERN: Other Macroeconomics: Aggregative Models (Topic)","volume":"60 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2018-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"86710083","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Most existing micro†level empirical analyses of corruption rely on administrative records, special†purpose surveys or field experiments, which can be difficult or very costly to obtain in some situations. In this paper, we apply an expenditure†based method of quantifying the extent of corruption in a particular country using household survey data. This method utilizes discrepancies between consumption and reported income to measure corruption. Another contribution of this paper is that it provides the first objective estimate of the extent of corruption in China. We use a quadratic clothing expenditure function to estimate the extent of corruption in China in 2002.
{"title":"Measuring Corruption in China: An Expenditure‐Based Approach Using Household Survey Data","authors":"Hai Zhong","doi":"10.1111/ecca.12198","DOIUrl":"https://doi.org/10.1111/ecca.12198","url":null,"abstract":"Most existing micro†level empirical analyses of corruption rely on administrative records, special†purpose surveys or field experiments, which can be difficult or very costly to obtain in some situations. In this paper, we apply an expenditure†based method of quantifying the extent of corruption in a particular country using household survey data. This method utilizes discrepancies between consumption and reported income to measure corruption. Another contribution of this paper is that it provides the first objective estimate of the extent of corruption in China. We use a quadratic clothing expenditure function to estimate the extent of corruption in China in 2002.","PeriodicalId":11754,"journal":{"name":"ERN: Other Macroeconomics: Aggregative Models (Topic)","volume":"52 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2018-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"86667637","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
With the credit‐channel effect driven by the central bank's open market operations, this paper's model easily gives rise to the nonlinear inflation‐growth nexus, which is evidenced by a number of cross‐country empirical studies. The threshold level of the inflation rate is found to be lower when tax rates are higher. The presence of the credit‐channel effect also provides the rationale for setting positive (and smaller than 1) tax rates on consumption, labor income, and capital income. The optimal tax rates rise as the inflation target declines. Under a fiscal policy rule where labor and capital income taxes move proportionally to each other, the optimal capital income tax rate could be higher than the optimal labor income tax rate. Under a sufficiently large central bank balance sheet, the credit‐channel effect will be so weak that inflation and all kinds of taxes are growth and welfare repressing. This provides a rationale for central banks that have implemented quantitative easing policies to shrink their balance sheets. (JEL E58, E62, O42)
{"title":"The Credit‐Channel Transmission Mechanism and the Nonlinear Growth and Welfare Effects of Inflation and Taxes","authors":"Shu-Hua Chen","doi":"10.1111/ecin.12546","DOIUrl":"https://doi.org/10.1111/ecin.12546","url":null,"abstract":"With the credit‐channel effect driven by the central bank's open market operations, this paper's model easily gives rise to the nonlinear inflation‐growth nexus, which is evidenced by a number of cross‐country empirical studies. The threshold level of the inflation rate is found to be lower when tax rates are higher. The presence of the credit‐channel effect also provides the rationale for setting positive (and smaller than 1) tax rates on consumption, labor income, and capital income. The optimal tax rates rise as the inflation target declines. Under a fiscal policy rule where labor and capital income taxes move proportionally to each other, the optimal capital income tax rate could be higher than the optimal labor income tax rate. Under a sufficiently large central bank balance sheet, the credit‐channel effect will be so weak that inflation and all kinds of taxes are growth and welfare repressing. This provides a rationale for central banks that have implemented quantitative easing policies to shrink their balance sheets. (JEL E58, E62, O42)","PeriodicalId":11754,"journal":{"name":"ERN: Other Macroeconomics: Aggregative Models (Topic)","volume":"27 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2018-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"87396734","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Limited human capital investment is a common characteristic of low-income countries despite the fact that estimated returns to educational investment in low-income countries are generally higher than in high-income countries. Empirical evidence suggests that income and credit constraints can only account for a small part of this underinvestment. Recent experimental evidence shows that families' misperceptions about the returns to education play a large role in their low investment levels. This paper builds a model of human capital and growth that incorporates an adaptive learning mechanism to capture the way agents form perceptions about returns to education. In an economy where human capital investments have both private and public returns, we find multiple learnable equilibria, including those which are characterized by low investment and low returns. We also find that even when the rational equilibrium corresponds to a high level of human capital investment, the learning mechanism, influenced by the agents' priors and cultural bias, may impart low human capital investment for extended periods. Policies that can speed up the learning process are examined and it is found that faster rates of growth can be achieved through interventions.
{"title":"Learning About Education","authors":"P. Emerson, Bruce McGough","doi":"10.1111/ecin.12487","DOIUrl":"https://doi.org/10.1111/ecin.12487","url":null,"abstract":"Limited human capital investment is a common characteristic of low-income countries despite the fact that estimated returns to educational investment in low-income countries are generally higher than in high-income countries. Empirical evidence suggests that income and credit constraints can only account for a small part of this underinvestment. Recent experimental evidence shows that families' misperceptions about the returns to education play a large role in their low investment levels. This paper builds a model of human capital and growth that incorporates an adaptive learning mechanism to capture the way agents form perceptions about returns to education. In an economy where human capital investments have both private and public returns, we find multiple learnable equilibria, including those which are characterized by low investment and low returns. We also find that even when the rational equilibrium corresponds to a high level of human capital investment, the learning mechanism, influenced by the agents' priors and cultural bias, may impart low human capital investment for extended periods. Policies that can speed up the learning process are examined and it is found that faster rates of growth can be achieved through interventions.","PeriodicalId":11754,"journal":{"name":"ERN: Other Macroeconomics: Aggregative Models (Topic)","volume":"41 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2018-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"83284344","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In the natural sciences, complex non-linear systems composed of large numbers of smaller subunits provide an opportunity to apply the tools of statistical mechanics and information theory. The principle of maximum entropy can usually provide shortcuts in the treatment of these complex systems. However, there is an impasse to straightforward application to social and economic systems: the lack of well-defined constraints for Lagrange multipliers. This is typically treated in economics by introducing marginal utility as a Lagrange multiplier. Jumping off from Gary Becker’s 1962 paper "Irrational Behavior and Economic Theory" — a maximum entropy argument in disguise — we introduce Peter Fielitz and Guenter Borchardt’s concept of "information equilibrium" presented in arXiv:0905.0610v4 [physics.gen-ph] as a means of applying maximum entropy methods even in cases where well-defined constraints such as energy conservation required to define Lagrange multipliers and partition functions are not obvious (i.e. economics). From these initial steps we are able to motivate a well-defined constraint in terms of growth rates and develop a formalism for ensembles of markets described by information equilibrium conditions. We apply information equilibrium to a description of the US unemployment rate, connect it to search and matching theory, and empirical regularities such as Okun’s Law. This represents a step toward Lee Smolin’s call for a "statistical economics" analogous to statistical mechanics in arXiv:0902.4274 [q-fin.GN].
{"title":"Maximum Entropy and Information Theory Approaches to Economics","authors":"Jason Smith","doi":"10.2139/ssrn.3094757","DOIUrl":"https://doi.org/10.2139/ssrn.3094757","url":null,"abstract":"In the natural sciences, complex non-linear systems composed of large numbers of smaller subunits provide an opportunity to apply the tools of statistical mechanics and information theory. The principle of maximum entropy can usually provide shortcuts in the treatment of these complex systems. However, there is an impasse to straightforward application to social and economic systems: the lack of well-defined constraints for Lagrange multipliers. This is typically treated in economics by introducing marginal utility as a Lagrange multiplier. \u0000Jumping off from Gary Becker’s 1962 paper \"Irrational Behavior and Economic Theory\" — a maximum entropy argument in disguise — we introduce Peter Fielitz and Guenter Borchardt’s concept of \"information equilibrium\" presented in arXiv:0905.0610v4 [physics.gen-ph] as a means of applying maximum entropy methods even in cases where well-defined constraints such as energy conservation required to define Lagrange multipliers and partition functions are not obvious (i.e. economics). From these initial steps we are able to motivate a well-defined constraint in terms of growth rates and develop a formalism for ensembles of markets described by information equilibrium conditions. We apply information equilibrium to a description of the US unemployment rate, connect it to search and matching theory, and empirical regularities such as Okun’s Law. This represents a step toward Lee Smolin’s call for a \"statistical economics\" analogous to statistical mechanics in arXiv:0902.4274 [q-fin.GN].","PeriodicalId":11754,"journal":{"name":"ERN: Other Macroeconomics: Aggregative Models (Topic)","volume":"36 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2017-12-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"87192511","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Dynamic Stochastic General Equilibrium (DSGE) models are the main tool used in Academia and in Central Banks to evaluate the business cycle for policy and forecasting analyses. Despite the recent advances in improving the fit of DSGE models to the data, the misspecification issue still remains. The aim of this survey is to shed light on the different forms of misspecification in DSGE modeling and how the researcher can identify the sources. In addition, some remedies to face with misspecification are discussed.
{"title":"Dealing with Misspecification in DSGE Models: A Survey","authors":"Alessia Paccagnini","doi":"10.2139/ssrn.3083615","DOIUrl":"https://doi.org/10.2139/ssrn.3083615","url":null,"abstract":"Dynamic Stochastic General Equilibrium (DSGE) models are the main tool used in Academia and in Central Banks to evaluate the business cycle for policy and forecasting analyses. Despite the recent advances in improving the fit of DSGE models to the data, the misspecification issue still remains. The aim of this survey is to shed light on the different forms of misspecification in DSGE modeling and how the researcher can identify the sources. In addition, some remedies to face with misspecification are discussed.","PeriodicalId":11754,"journal":{"name":"ERN: Other Macroeconomics: Aggregative Models (Topic)","volume":"19 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2017-11-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"84044776","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper studies optimal income taxation when there are different types of jobs for workers of different skills. Each type of job has a given feasible range of incomes from which workers can choose by varying their labour supply. Workers are more productive than all others in the jobs that suit them best. The model combines features of the classic optimal income tax literature with labour variability along the intensive margin with those of the extensive-margin approach where workers make discrete job choices and/or participation decisions. Some specific results are as follows. First-best maximin levels of utility can be achieved in the second-best. Marginal tax rates below the top can often be negative or zero. When there are more than two skill-types of workers and jobs, incentive constraints are not necessarily binding on adjacent types as in the standard intensive-margin model. When participation decisions are allowed, the intensive margin and the extensive margin tend to have opposite effects on the level of participation taxes.
{"title":"Optimal Income Taxation and Job Choice","authors":"Robin Boadway, Zhen Song, J. Tremblay","doi":"10.1111/sjoe.12199","DOIUrl":"https://doi.org/10.1111/sjoe.12199","url":null,"abstract":"This paper studies optimal income taxation when there are different types of jobs for workers of different skills. Each type of job has a given feasible range of incomes from which workers can choose by varying their labour supply. Workers are more productive than all others in the jobs that suit them best. The model combines features of the classic optimal income tax literature with labour variability along the intensive margin with those of the extensive-margin approach where workers make discrete job choices and/or participation decisions. Some specific results are as follows. First-best maximin levels of utility can be achieved in the second-best. Marginal tax rates below the top can often be negative or zero. When there are more than two skill-types of workers and jobs, incentive constraints are not necessarily binding on adjacent types as in the standard intensive-margin model. When participation decisions are allowed, the intensive margin and the extensive margin tend to have opposite effects on the level of participation taxes.","PeriodicalId":11754,"journal":{"name":"ERN: Other Macroeconomics: Aggregative Models (Topic)","volume":"47 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2017-10-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"86445962","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This article presents an introduction to the Building a New Life in Australia (BNLA) dataset, a large-scale longitudinal study of humanitarian migrants in Australia. We outline the main characteristics of the study and provide an overview of the measures available and potential uses. The first three waves of the BNLA data are currently available to approved users, covering the first three years of the settlement journey of a recent cohort of humanitarian migrants in Australia.
{"title":"The Building a New Life in Australia (BNLA) Dataset: A Longitudinal Study of Humanitarian Migrants in Australia","authors":"Pilar Rioseco, John De Maio, Cuc Hoang","doi":"10.1111/1467-8462.12234","DOIUrl":"https://doi.org/10.1111/1467-8462.12234","url":null,"abstract":"This article presents an introduction to the Building a New Life in Australia (BNLA) dataset, a large-scale longitudinal study of humanitarian migrants in Australia. We outline the main characteristics of the study and provide an overview of the measures available and potential uses. The first three waves of the BNLA data are currently available to approved users, covering the first three years of the settlement journey of a recent cohort of humanitarian migrants in Australia.","PeriodicalId":11754,"journal":{"name":"ERN: Other Macroeconomics: Aggregative Models (Topic)","volume":"13 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2017-07-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"88029553","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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