Abstract We experimentally study how people form expectations about correlated variables. Subjects forecast a time-series variable A. In treatment Baseline, subjects only observe past values of A. In treatment Correlated, they additionally observe a correlated variable B; A is equally predictable and has the same univariate properties in both treatments. Subjects are significantly less accurate and underreact more in Correlated, inconsistent with Bayesian learning. A structural-model estimation indicates that subjects (i) underestimate the level of correlation; and (ii) are insensitive to actual correlation. Our study provides first direct evidence of correlation neglect in the domain of expectation formation.
{"title":"Expectation Formation with Correlated Variables","authors":"Simin He, Simas Kučinskas","doi":"10.1093/ej/uead096","DOIUrl":"https://doi.org/10.1093/ej/uead096","url":null,"abstract":"Abstract We experimentally study how people form expectations about correlated variables. Subjects forecast a time-series variable A. In treatment Baseline, subjects only observe past values of A. In treatment Correlated, they additionally observe a correlated variable B; A is equally predictable and has the same univariate properties in both treatments. Subjects are significantly less accurate and underreact more in Correlated, inconsistent with Bayesian learning. A structural-model estimation indicates that subjects (i) underestimate the level of correlation; and (ii) are insensitive to actual correlation. Our study provides first direct evidence of correlation neglect in the domain of expectation formation.","PeriodicalId":48448,"journal":{"name":"Economic Journal","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2023-10-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135976450","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract We present a theory of monopoly protection by means of entry in adjacent markets that have a common customer base (i.e., envelopment). A firm dominant in its market enters a data-rich secondary market and engages in predatory pricing and privacy-policy tying. We define the latter as conditioning service provision to the subscription of a privacy-policy that allows bundling of user data across all sources. Acquiring data from the secondary market confers an advantage in the data-intensive primary market that shields the dominant firm from entry, thus harming consumers. We discuss potential remedies, including data unbundling and portability.
{"title":"Data-Driven Envelopment with Privacy-Policy Tying","authors":"Daniele Condorelli, Jorge Padilla","doi":"10.1093/ej/uead090","DOIUrl":"https://doi.org/10.1093/ej/uead090","url":null,"abstract":"Abstract We present a theory of monopoly protection by means of entry in adjacent markets that have a common customer base (i.e., envelopment). A firm dominant in its market enters a data-rich secondary market and engages in predatory pricing and privacy-policy tying. We define the latter as conditioning service provision to the subscription of a privacy-policy that allows bundling of user data across all sources. Acquiring data from the secondary market confers an advantage in the data-intensive primary market that shields the dominant firm from entry, thus harming consumers. We discuss potential remedies, including data unbundling and portability.","PeriodicalId":48448,"journal":{"name":"Economic Journal","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2023-10-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135976787","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract People care about crime, with the spatial distribution of both actual and perceived crime affecting the amenities from living in different areas and residential decisions. The literature finds that crime tends to happen close to the offender's residence but does not clearly establish whether this is because the location of likely offenders and crime opportunities are close to each other, whether more local crimes are likely to be solved or whether there is a high commuting cost for criminals. We use a rich administrative dataset from one of the biggest UK police forces to disentangle these hypotheses proposing a procedure for controlling for the selection bias induced by the fact that offenders’ location is only known when they are caught. We find that the cost of distance is very high, especially for crimes without any financial gain. For property crimes, we find a similar cost of distance to commuting for legal work. We also investigate how local socio-economic characteristics affect both the number of criminals and crimes.
{"title":"Commuting for crime","authors":"Tom Kirchmaier, Monica Langella, Alan Manning","doi":"10.1093/ej/uead089","DOIUrl":"https://doi.org/10.1093/ej/uead089","url":null,"abstract":"Abstract People care about crime, with the spatial distribution of both actual and perceived crime affecting the amenities from living in different areas and residential decisions. The literature finds that crime tends to happen close to the offender's residence but does not clearly establish whether this is because the location of likely offenders and crime opportunities are close to each other, whether more local crimes are likely to be solved or whether there is a high commuting cost for criminals. We use a rich administrative dataset from one of the biggest UK police forces to disentangle these hypotheses proposing a procedure for controlling for the selection bias induced by the fact that offenders’ location is only known when they are caught. We find that the cost of distance is very high, especially for crimes without any financial gain. For property crimes, we find a similar cost of distance to commuting for legal work. We also investigate how local socio-economic characteristics affect both the number of criminals and crimes.","PeriodicalId":48448,"journal":{"name":"Economic Journal","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2023-10-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"136318175","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract Advances in evolutionary theories (the Extended Synthesis) demonstrate that organisms systematically modify environments in ways that influence their own and other species’ evolution. This paper utilizes these theories to examine the economic consequences of human dispersal from Africa. Evidence shows that early humans’ dispersal affected the adaptability of animal species to human environments and, through this, the extinction of large mammals during Homo sapiens’ out-of-Africa migration. Empirical analyses explore the variation in extinction rates as a source of exogenous pressure for cooperation and innovation among hunter–gatherers and examine the impact of extinction on long-run development. The results indicate that extinction affects economic performance by driving continental differences in biogeography, disease environments, and institutions. Eurasia’s location along the out-of-Africa migratory path provided human and animal populations with coevolutionary foundations for domestication and agriculture, which gave Eurasians technological and institutional advantages in comparative development.
{"title":"Macroevolutionary Origins of Comparative Development","authors":"Ideen A Riahi","doi":"10.1093/ej/uead095","DOIUrl":"https://doi.org/10.1093/ej/uead095","url":null,"abstract":"Abstract Advances in evolutionary theories (the Extended Synthesis) demonstrate that organisms systematically modify environments in ways that influence their own and other species’ evolution. This paper utilizes these theories to examine the economic consequences of human dispersal from Africa. Evidence shows that early humans’ dispersal affected the adaptability of animal species to human environments and, through this, the extinction of large mammals during Homo sapiens’ out-of-Africa migration. Empirical analyses explore the variation in extinction rates as a source of exogenous pressure for cooperation and innovation among hunter–gatherers and examine the impact of extinction on long-run development. The results indicate that extinction affects economic performance by driving continental differences in biogeography, disease environments, and institutions. Eurasia’s location along the out-of-Africa migratory path provided human and animal populations with coevolutionary foundations for domestication and agriculture, which gave Eurasians technological and institutional advantages in comparative development.","PeriodicalId":48448,"journal":{"name":"Economic Journal","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2023-10-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"136376462","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract This paper analyses the rise of radical movements and the design of counter-radicalisation policies. A group derives meaning from participation in identity-based activities and a forward-looking organisation provides a platform for these activities. The warning sign for radicalisation is cultural purification by the organisation, i.e. the screening out of moderates and exclusive recruitment of radicals. While this shrinks the club, it puts it on a growth path along which it becomes larger and more extreme over time. Conventional counter-radicalisation policies can backfire. The radicalisation mechanisms we identify can be disabled by mild anti-radical messaging and informational interventions that eliminate stereotypes.
{"title":"Radicalisation","authors":"Jean-Paul Carvalho, Michael Sacks","doi":"10.1093/ej/uead094","DOIUrl":"https://doi.org/10.1093/ej/uead094","url":null,"abstract":"Abstract This paper analyses the rise of radical movements and the design of counter-radicalisation policies. A group derives meaning from participation in identity-based activities and a forward-looking organisation provides a platform for these activities. The warning sign for radicalisation is cultural purification by the organisation, i.e. the screening out of moderates and exclusive recruitment of radicals. While this shrinks the club, it puts it on a growth path along which it becomes larger and more extreme over time. Conventional counter-radicalisation policies can backfire. The radicalisation mechanisms we identify can be disabled by mild anti-radical messaging and informational interventions that eliminate stereotypes.","PeriodicalId":48448,"journal":{"name":"Economic Journal","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2023-10-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"134909955","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract The long-recognized spurious regressions problem can lead to mistaken inference in panel instrumental variables (IV) estimation. Spurious correlations arising from correlated cycles in finite time horizons can make irrelevant instruments appear strong with signable consequences for estimated IV coefficients, or interfere with valid of inference of causal effects from IV coefficients estimated using relevant instruments. The inclusion of time fixed effects in interacted specifications does not always resolve these problems. We demonstrate these concerns by revisiting recent studies of the causal origins of conflict. We offer diagnostic and corrective recommendations for avoiding the pitfalls arising from time series exhibiting persistence.
{"title":"Spurious Regressions and Panel IV Estimation: Revisiting the Causes of Conflict","authors":"Paul Christian, Christopher B Barrett","doi":"10.1093/ej/uead091","DOIUrl":"https://doi.org/10.1093/ej/uead091","url":null,"abstract":"Abstract The long-recognized spurious regressions problem can lead to mistaken inference in panel instrumental variables (IV) estimation. Spurious correlations arising from correlated cycles in finite time horizons can make irrelevant instruments appear strong with signable consequences for estimated IV coefficients, or interfere with valid of inference of causal effects from IV coefficients estimated using relevant instruments. The inclusion of time fixed effects in interacted specifications does not always resolve these problems. We demonstrate these concerns by revisiting recent studies of the causal origins of conflict. We offer diagnostic and corrective recommendations for avoiding the pitfalls arising from time series exhibiting persistence.","PeriodicalId":48448,"journal":{"name":"Economic Journal","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2023-10-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135168270","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract In most OECD countries, unemployment rates show no trend, which is puzzling if advancements in ICT decrease labour market frictions. We show, both analytically and quantitatively, that accounting for the secular decline in self-employment rates solves the puzzle. While declining labour market frictions can theoretically explain these trends, we provide contradictory causal evidence that the rollout of broadband Internet increased self-employment and decreased unemployment rates. We reconcile these observations with a new model featuring frictions in both labour and goods markets. We explain falling self-employment and non-trending unemployment quantitatively by labour market frictions declining relatively more than goods market frictions.
{"title":"Declining search frictions, unemployment and self-employment","authors":"Piotr Denderski, Florian Sniekers","doi":"10.1093/ej/uead093","DOIUrl":"https://doi.org/10.1093/ej/uead093","url":null,"abstract":"Abstract In most OECD countries, unemployment rates show no trend, which is puzzling if advancements in ICT decrease labour market frictions. We show, both analytically and quantitatively, that accounting for the secular decline in self-employment rates solves the puzzle. While declining labour market frictions can theoretically explain these trends, we provide contradictory causal evidence that the rollout of broadband Internet increased self-employment and decreased unemployment rates. We reconcile these observations with a new model featuring frictions in both labour and goods markets. We explain falling self-employment and non-trending unemployment quantitatively by labour market frictions declining relatively more than goods market frictions.","PeriodicalId":48448,"journal":{"name":"Economic Journal","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2023-10-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135414531","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract This paper shows that austerity spending cuts harmed student performance in standardized national tests. To identify this relationship, we use cross-municipality variation in the timing of eligibility for the Italian Domestic Stability Pact as an exogenous shifter of local public spending. We then compare test scores for students that were from the same municipality, but who were exposed to different levels of austerity cuts based on their birth year. Combining administrative data on public spending and test scores with an instrumental variable model, we show that the test score impact from austerity spending cuts is around 5.1% of a standard deviation in math, and 4.6% in reading. These effects are more pronounced for children with limited resources at home. We provide suggestive evidence that school budget cuts account for most of the observed test score impact.
{"title":"Austerity Harmed Student Achievement","authors":"Caterina Pavese, Enrico Rubolino","doi":"10.1093/ej/uead092","DOIUrl":"https://doi.org/10.1093/ej/uead092","url":null,"abstract":"Abstract This paper shows that austerity spending cuts harmed student performance in standardized national tests. To identify this relationship, we use cross-municipality variation in the timing of eligibility for the Italian Domestic Stability Pact as an exogenous shifter of local public spending. We then compare test scores for students that were from the same municipality, but who were exposed to different levels of austerity cuts based on their birth year. Combining administrative data on public spending and test scores with an instrumental variable model, we show that the test score impact from austerity spending cuts is around 5.1% of a standard deviation in math, and 4.6% in reading. These effects are more pronounced for children with limited resources at home. We provide suggestive evidence that school budget cuts account for most of the observed test score impact.","PeriodicalId":48448,"journal":{"name":"Economic Journal","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2023-10-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135414538","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pavel Atanasov, Jason D Dana, Bouke Klein Teeselink
Abstract Gender discrimination is present across various fields, but identifying the underlying mechanism is challenging. We demonstrate own-gender favouritism in a field setting that allows for clean identification of tastes versus beliefs: the One Bid game on the TV show The Price Is Right. Players must guess an item’s value without exceeding it, leaving the last bidder with a dominant ‘cutoff’ strategy of overbidding another player by ${$}$1. We show that last bidders are significantly more likely to cut off opposite-gender opponents. This behaviour is explained by own-gender favouritism rather than beliefs that cutting off opposite-gender opponents is more profitable.
{"title":"Taste-Based Gender Favouritism in High Stakes Decisions: Evidence from The Price Is Right","authors":"Pavel Atanasov, Jason D Dana, Bouke Klein Teeselink","doi":"10.1093/ej/uead087","DOIUrl":"https://doi.org/10.1093/ej/uead087","url":null,"abstract":"Abstract Gender discrimination is present across various fields, but identifying the underlying mechanism is challenging. We demonstrate own-gender favouritism in a field setting that allows for clean identification of tastes versus beliefs: the One Bid game on the TV show The Price Is Right. Players must guess an item’s value without exceeding it, leaving the last bidder with a dominant ‘cutoff’ strategy of overbidding another player by ${$}$1. We show that last bidders are significantly more likely to cut off opposite-gender opponents. This behaviour is explained by own-gender favouritism rather than beliefs that cutting off opposite-gender opponents is more profitable.","PeriodicalId":48448,"journal":{"name":"Economic Journal","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2023-10-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135045779","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract Intra-household inequality explains 40% of child human capital variation in the developing world. I study how parents’ investment contributes to this inequality. To mitigate the identification problem posed by observational data, I design a survey experiment with parents in India that allows me to identify beliefs about the human capital production, preferences for inequality in outcomes, and the role of resources. I find that investments are driven by efficiency considerations: as parents perceive investment and ability as complements, they invest more in higher-achieving children and more so when constrained. Simulations indicate that interventions have intra-household distributional impacts through parental responses.
{"title":"Parental Investments and Intra-household Inequality in Child Human Capital: Evidence from a Survey Experiment","authors":"Michele Giannola","doi":"10.1093/ej/uead086","DOIUrl":"https://doi.org/10.1093/ej/uead086","url":null,"abstract":"Abstract Intra-household inequality explains 40% of child human capital variation in the developing world. I study how parents’ investment contributes to this inequality. To mitigate the identification problem posed by observational data, I design a survey experiment with parents in India that allows me to identify beliefs about the human capital production, preferences for inequality in outcomes, and the role of resources. I find that investments are driven by efficiency considerations: as parents perceive investment and ability as complements, they invest more in higher-achieving children and more so when constrained. Simulations indicate that interventions have intra-household distributional impacts through parental responses.","PeriodicalId":48448,"journal":{"name":"Economic Journal","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2023-10-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"134943636","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"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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