The principle of revealed preference is the backbone of structural empirical work on consumer demand. It focuses on what we can learn about the processes by which economic agents make decisions, using observed choices and minimal auxiliary assumptions. Classical revealed preference methods assume that choices and preferences are stable and consistent, but many studies have found violations of these assumptions both in consumer data and experimental settings. Recent research effort extends far beyond the axiomatic characterization of neoclassical choice models. New behavioural theories explain these violations in a theoretically founded way, considering data consistency and preference recoverability for a wide class of behavioural models. This article reviews some of the themes emerging from the recent literature.
{"title":"Revealed preference analysis and bounded rationality","authors":"Eileen Tipoe, Abi Adams, Ian Crawford","doi":"10.1093/oep/gpab018","DOIUrl":"https://doi.org/10.1093/oep/gpab018","url":null,"abstract":"\u0000 The principle of revealed preference is the backbone of structural empirical work on consumer demand. It focuses on what we can learn about the processes by which economic agents make decisions, using observed choices and minimal auxiliary assumptions. Classical revealed preference methods assume that choices and preferences are stable and consistent, but many studies have found violations of these assumptions both in consumer data and experimental settings. Recent research effort extends far beyond the axiomatic characterization of neoclassical choice models. New behavioural theories explain these violations in a theoretically founded way, considering data consistency and preference recoverability for a wide class of behavioural models. This article reviews some of the themes emerging from the recent literature.","PeriodicalId":48092,"journal":{"name":"Oxford Economic Papers-New Series","volume":" ","pages":""},"PeriodicalIF":1.2,"publicationDate":"2021-08-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47109424","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The large purchase of public sector bonds (PSPP) by the ECB constitutes an interesting special case of quantitative easing (QE). It involved the purchase of risky, peripheral euro area government bonds—not by the ECB itself but by the national central banks at their own risk. The PSPP can be assimilated into a buy-back financed with senior debt, which should reduce the value of the remaining debt. Theory thus suggests that the PSPP should not be expected to have a positive impact on peripheral risk spreads. Empirical studies try to measure the impact of the asset purchases of central banks (QE) using the market reaction at the announcement date. The announcement effects are taken to be permanent because long-term rates are assumed to follow a random walk. We show that this assumption is not warranted for the risk spreads on bonds or the credit default swaps of peripheral euro area countries.
{"title":"Central bank purchases of sovereign bonds in the euro area, the random walk hypothesis, and different measures of risk","authors":"A. Belke, D. Gros, Farzaneh Shamsfakhr","doi":"10.1093/oep/gpab016","DOIUrl":"https://doi.org/10.1093/oep/gpab016","url":null,"abstract":"\u0000 The large purchase of public sector bonds (PSPP) by the ECB constitutes an interesting special case of quantitative easing (QE). It involved the purchase of risky, peripheral euro area government bonds—not by the ECB itself but by the national central banks at their own risk. The PSPP can be assimilated into a buy-back financed with senior debt, which should reduce the value of the remaining debt. Theory thus suggests that the PSPP should not be expected to have a positive impact on peripheral risk spreads. Empirical studies try to measure the impact of the asset purchases of central banks (QE) using the market reaction at the announcement date. The announcement effects are taken to be permanent because long-term rates are assumed to follow a random walk. We show that this assumption is not warranted for the risk spreads on bonds or the credit default swaps of peripheral euro area countries.","PeriodicalId":48092,"journal":{"name":"Oxford Economic Papers-New Series","volume":" ","pages":""},"PeriodicalIF":1.2,"publicationDate":"2021-08-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47173962","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This article aims to estimate fiscal multipliers in Italy by assessing the effect of an increase in government expenditure and taxes on the Gross Domestic Product (GDP). By applying structural vector autoregressive modelling to Italian quarterly data for the 1995–2019 period, I show that expansionary fiscal policies produce positive effects on the GDP level. Estimated spending multipliers are higher than 1, and when government investment and consumption are compared, findings show that government investment has a larger effect on GDP than government consumption. Estimated tax multipliers are lower than 1, and tax-based policies are less effective in stimulating GDP than expenditure-based fiscal plans. My findings strongly support the Keynesian perspective and indicate that Italy should increase public investments considerably in order to foster economic growth.
{"title":"Quantifying multipliers in Italy: does fiscal policy composition matter?","authors":"Matteo Deleidi","doi":"10.1093/OEP/GPAB028","DOIUrl":"https://doi.org/10.1093/OEP/GPAB028","url":null,"abstract":"\u0000 This article aims to estimate fiscal multipliers in Italy by assessing the effect of an increase in government expenditure and taxes on the Gross Domestic Product (GDP). By applying structural vector autoregressive modelling to Italian quarterly data for the 1995–2019 period, I show that expansionary fiscal policies produce positive effects on the GDP level. Estimated spending multipliers are higher than 1, and when government investment and consumption are compared, findings show that government investment has a larger effect on GDP than government consumption. Estimated tax multipliers are lower than 1, and tax-based policies are less effective in stimulating GDP than expenditure-based fiscal plans. My findings strongly support the Keynesian perspective and indicate that Italy should increase public investments considerably in order to foster economic growth.","PeriodicalId":48092,"journal":{"name":"Oxford Economic Papers-New Series","volume":" ","pages":""},"PeriodicalIF":1.2,"publicationDate":"2021-07-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47806243","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This article introduces a new measure of fiscal policy uncertainty (FPU) based on the disagreement among professional forecasters. We analyse different patterns of this measure for the German economy and also use Italian data for comparison. Especially, we examine the impact of the introduction of the German ‘debt brake’ on FPU. Finally, we conduct an impulse response analysis to investigate the effect of FPU on the real economy and we provide robust evidence that FPU significantly decreases the growth rate of industrial production. The corresponding effect is robust to various sensitivity checks and exceeds the impact of a general measure of economic policy uncertainty. In general, the negative effect on the real economy might be explained by lower hiring and investment by firms, higher costs of financing due to risk premia and lower consumption spending as a result of precautionary savings.
{"title":"Fiscal policy uncertainty and its effects on the real economy: German evidence","authors":"J. Beckmann, Robert L. Czudaj","doi":"10.1093/OEP/GPAB009","DOIUrl":"https://doi.org/10.1093/OEP/GPAB009","url":null,"abstract":"\u0000 This article introduces a new measure of fiscal policy uncertainty (FPU) based on the disagreement among professional forecasters. We analyse different patterns of this measure for the German economy and also use Italian data for comparison. Especially, we examine the impact of the introduction of the German ‘debt brake’ on FPU. Finally, we conduct an impulse response analysis to investigate the effect of FPU on the real economy and we provide robust evidence that FPU significantly decreases the growth rate of industrial production. The corresponding effect is robust to various sensitivity checks and exceeds the impact of a general measure of economic policy uncertainty. In general, the negative effect on the real economy might be explained by lower hiring and investment by firms, higher costs of financing due to risk premia and lower consumption spending as a result of precautionary savings.","PeriodicalId":48092,"journal":{"name":"Oxford Economic Papers-New Series","volume":" ","pages":""},"PeriodicalIF":1.2,"publicationDate":"2021-07-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"42155172","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This article examines the evolutionary behavior of boundedly rational agents under nonconvexity and externalities. While allowing for technical and allocative inefficiency, we evaluate how producer and consumer behavior can use evolutionary rules that eventually lead to Pareto efficient allocations. We study how markets can support the convergence to efficiency, stressing that externalities and nonconvexity can require nonlinear pricing. In an evolutionary economy, we show how pricing and decentralized decisions can support moves toward Pareto efficiency under bounded rationality, nonconvexity and externalities.
{"title":"Evolutionary economics under nonconvexity and externalities","authors":"J. Chavas, Runhao Wang","doi":"10.1093/oep/gpab020","DOIUrl":"https://doi.org/10.1093/oep/gpab020","url":null,"abstract":"\u0000 This article examines the evolutionary behavior of boundedly rational agents under nonconvexity and externalities. While allowing for technical and allocative inefficiency, we evaluate how producer and consumer behavior can use evolutionary rules that eventually lead to Pareto efficient allocations. We study how markets can support the convergence to efficiency, stressing that externalities and nonconvexity can require nonlinear pricing. In an evolutionary economy, we show how pricing and decentralized decisions can support moves toward Pareto efficiency under bounded rationality, nonconvexity and externalities.","PeriodicalId":48092,"journal":{"name":"Oxford Economic Papers-New Series","volume":" ","pages":""},"PeriodicalIF":1.2,"publicationDate":"2021-07-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47260333","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Poverty in low-income countries is usually measured using large and infrequent household consumption surveys. The challenge is to find methods to measure poverty rates more frequently. This study validates a survey-to-survey imputation method, based on a statistical model utilizing consumption surveys and light surveys to measure changes in poverty rates over time. A decade of poverty predictions and regular poverty estimates in Malawi provides a unique case study. The analysis suggests that this modelling approach works within the same context given that households’ demographic composition is included in the model. Predicting poverty using different surveys is challenging because of different aspects of comparability. A new way to account for seasonal coverage strengthens the model when imputing for surveys covering different seasons. It is important for national statistics offices and supporting agencies to prioritize maintaining consistency in the way data are collected in surveys to provide comparable trends over time.
{"title":"Predicting poverty trends by survey-to-survey imputation: the challenge of comparability","authors":"A. Mathiassen, B. Wold","doi":"10.1093/oep/gpab014","DOIUrl":"https://doi.org/10.1093/oep/gpab014","url":null,"abstract":"\u0000 Poverty in low-income countries is usually measured using large and infrequent household consumption surveys. The challenge is to find methods to measure poverty rates more frequently. This study validates a survey-to-survey imputation method, based on a statistical model utilizing consumption surveys and light surveys to measure changes in poverty rates over time. A decade of poverty predictions and regular poverty estimates in Malawi provides a unique case study. The analysis suggests that this modelling approach works within the same context given that households’ demographic composition is included in the model. Predicting poverty using different surveys is challenging because of different aspects of comparability. A new way to account for seasonal coverage strengthens the model when imputing for surveys covering different seasons. It is important for national statistics offices and supporting agencies to prioritize maintaining consistency in the way data are collected in surveys to provide comparable trends over time.","PeriodicalId":48092,"journal":{"name":"Oxford Economic Papers-New Series","volume":" ","pages":""},"PeriodicalIF":1.2,"publicationDate":"2021-06-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48497177","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Sarah Brown, M. Harris, Preety Srivastava, K. Taylor
Measures of mental health are heavily relied upon to identify at-risk individuals. However, self-reported mental health metrics might be unduly affected by mis-reporting (perhaps stemming from stigma effects). In this article, we consider this phenomenon by focusing upon the mis-reporting of mental health using UK panel data from 1991 to 2018. In separate analyses of males and females, we examine how inaccurate reporting of the General Health Questionnaire (GHQ-12) measure, specifically its sub-components, can adversely affect the distribution of the index. The analysis suggests that individuals typically over report their mental health (especially so for males). The results are then used to adjust the GHQ-12 score to take mis-reporting into account. We then compare the effects of the adjusted/unadjusted GHQ-12 index when modelling a number of important economic transitions. Using the original index typically leads to an underestimate of the effect of poor mental health on transitions into improved economic states, for example, unemployment to employment.
{"title":"Mental health, reporting bias and economic transitions","authors":"Sarah Brown, M. Harris, Preety Srivastava, K. Taylor","doi":"10.1093/OEP/GPAB005","DOIUrl":"https://doi.org/10.1093/OEP/GPAB005","url":null,"abstract":"\u0000 Measures of mental health are heavily relied upon to identify at-risk individuals. However, self-reported mental health metrics might be unduly affected by mis-reporting (perhaps stemming from stigma effects). In this article, we consider this phenomenon by focusing upon the mis-reporting of mental health using UK panel data from 1991 to 2018. In separate analyses of males and females, we examine how inaccurate reporting of the General Health Questionnaire (GHQ-12) measure, specifically its sub-components, can adversely affect the distribution of the index. The analysis suggests that individuals typically over report their mental health (especially so for males). The results are then used to adjust the GHQ-12 score to take mis-reporting into account. We then compare the effects of the adjusted/unadjusted GHQ-12 index when modelling a number of important economic transitions. Using the original index typically leads to an underestimate of the effect of poor mental health on transitions into improved economic states, for example, unemployment to employment.","PeriodicalId":48092,"journal":{"name":"Oxford Economic Papers-New Series","volume":" ","pages":""},"PeriodicalIF":1.2,"publicationDate":"2021-05-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1093/OEP/GPAB005","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"44172264","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Recent evidence suggests that the average effects of microfinance on borrowers is more modest than previously claimed. We carry out an experiment to test whether an intervention designed to increase aspirational hope among borrowers can elevate microfinance impacts. In collaboration with a microfinance lender in Mexico, we produced a documentary featuring successful borrowers within the organization and designed and implemented a hope curriculum rooted in positive psychology (Snyder, 1994), which conceptualizes hope as aspirations, agency, and pathways. Bank officers incorporated this curriculum into their regular weekly meetings with a randomly treated half of 52 women’s savings and credit groups with 733 women over the course of one year. We find that the intervention modestly increased indices measuring both aspirational hope and microenterprise performance over this time period. The intervention significantly increased employment and plans to hire new employees. Increases in microenterprise sales and profits were positive but statistically insignificant.
{"title":"Can hope elevate microfinance? Evidence from Oaxaca, Mexico","authors":"R. I. R. Valdés, Bruce Wydick, Travis J. Lybbert","doi":"10.1093/OEP/GPAA039","DOIUrl":"https://doi.org/10.1093/OEP/GPAA039","url":null,"abstract":"\u0000 Recent evidence suggests that the average effects of microfinance on borrowers is more modest than previously claimed. We carry out an experiment to test whether an intervention designed to increase aspirational hope among borrowers can elevate microfinance impacts. In collaboration with a microfinance lender in Mexico, we produced a documentary featuring successful borrowers within the organization and designed and implemented a hope curriculum rooted in positive psychology (Snyder, 1994), which conceptualizes hope as aspirations, agency, and pathways. Bank officers incorporated this curriculum into their regular weekly meetings with a randomly treated half of 52 women’s savings and credit groups with 733 women over the course of one year. We find that the intervention modestly increased indices measuring both aspirational hope and microenterprise performance over this time period. The intervention significantly increased employment and plans to hire new employees. Increases in microenterprise sales and profits were positive but statistically insignificant.","PeriodicalId":48092,"journal":{"name":"Oxford Economic Papers-New Series","volume":" ","pages":""},"PeriodicalIF":1.2,"publicationDate":"2021-02-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1093/OEP/GPAA039","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"45160198","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This article demonstrates that economic conditions affect job match quality by influencing the task shares of available jobs. Cognitive (reasoning/communication) and physical (sensory/coordination) task shares and education-based overqualification measures are generated from Canada’s Labour Force Survey, the Career Handbook, and the Occupational Information Network database. In unfavourable labour markets, cognitive task intensity decreases and physical task intensity rises. The task content of newly formed jobs is then shown to be an important empirical determinant of overqualification. A calibrated search model that accounts for these findings quantifies the costs of increased overqualification. Each percentage point increase in unemployment raises overqualification by 5.8 percentage points, partly due to changes in task shares. Economic output subsequently decreases by about 0.6%.
{"title":"Economic conditions, task shares, and overqualification","authors":"F. Summerfield","doi":"10.1093/OEP/GPAB002","DOIUrl":"https://doi.org/10.1093/OEP/GPAB002","url":null,"abstract":"\u0000 This article demonstrates that economic conditions affect job match quality by influencing the task shares of available jobs. Cognitive (reasoning/communication) and physical (sensory/coordination) task shares and education-based overqualification measures are generated from Canada’s Labour Force Survey, the Career Handbook, and the Occupational Information Network database. In unfavourable labour markets, cognitive task intensity decreases and physical task intensity rises. The task content of newly formed jobs is then shown to be an important empirical determinant of overqualification. A calibrated search model that accounts for these findings quantifies the costs of increased overqualification. Each percentage point increase in unemployment raises overqualification by 5.8 percentage points, partly due to changes in task shares. Economic output subsequently decreases by about 0.6%.","PeriodicalId":48092,"journal":{"name":"Oxford Economic Papers-New Series","volume":" ","pages":""},"PeriodicalIF":1.2,"publicationDate":"2021-02-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"46760734","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We explore the intersection of growth theory and the theory of the firm with an experiment. Economic growth is possible in our experiment when agents specialize to exploit increasing returns. We find that low opportunity costs are sufficient for Marshallian internal economies, but that Marshallian external economies are slow to emerge in four probing treatment conditions. Transaction costs do not hamper external economies as we anticipated prior to collecting data. When external economies falter, it is because new ideas of more extensive specialization fail to emerge. Ideas make further divisions of the division of labour—and thus economic growth—possible. Conversely, a lack of ideas make further divisions of labour and economic growth impossible. Our data reveal how the likelihood of new ideas is inseparably tied to the existing extent of specialization.
{"title":"No mere tautology: the division of labour is limited by the division of labour","authors":"Andrew Smyth, B. Wilson","doi":"10.1093/OEP/GPZ067","DOIUrl":"https://doi.org/10.1093/OEP/GPZ067","url":null,"abstract":"\u0000 We explore the intersection of growth theory and the theory of the firm with an experiment. Economic growth is possible in our experiment when agents specialize to exploit increasing returns. We find that low opportunity costs are sufficient for Marshallian internal economies, but that Marshallian external economies are slow to emerge in four probing treatment conditions. Transaction costs do not hamper external economies as we anticipated prior to collecting data. When external economies falter, it is because new ideas of more extensive specialization fail to emerge. Ideas make further divisions of the division of labour—and thus economic growth—possible. Conversely, a lack of ideas make further divisions of labour and economic growth impossible. Our data reveal how the likelihood of new ideas is inseparably tied to the existing extent of specialization.","PeriodicalId":48092,"journal":{"name":"Oxford Economic Papers-New Series","volume":" ","pages":""},"PeriodicalIF":1.2,"publicationDate":"2021-02-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1093/OEP/GPZ067","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"42305514","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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