Abstract We examine the impact of M&A announcements on stock prices of targets and acquirers in the European Union from 2002 to 2021. In line with the literature, we find strong positive returns for the target firms’ stocks, whereas returns are low or insignificant for the acquirers. We contribute to the literature by focusing on the effect of takeover competition and distinguishing between the returns of first and later bids. Accordingly, we confirm strong relationships between subsequent offers and target firms’ stock returns. These returns increase if a second order is made and if the premium related to the second offer is higher.
{"title":"How Does Takeover Competition Affect the Stock Performance of Targets and Acquirers? Evidence from the European Union","authors":"Tobi Kellner, Dominik Maltritz","doi":"10.1515/roe-2023-0058","DOIUrl":"https://doi.org/10.1515/roe-2023-0058","url":null,"abstract":"Abstract We examine the impact of M&A announcements on stock prices of targets and acquirers in the European Union from 2002 to 2021. In line with the literature, we find strong positive returns for the target firms’ stocks, whereas returns are low or insignificant for the acquirers. We contribute to the literature by focusing on the effect of takeover competition and distinguishing between the returns of first and later bids. Accordingly, we confirm strong relationships between subsequent offers and target firms’ stock returns. These returns increase if a second order is made and if the premium related to the second offer is higher.","PeriodicalId":48456,"journal":{"name":"Review of Economics and Statistics","volume":null,"pages":null},"PeriodicalIF":8.0,"publicationDate":"2023-08-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"82270593","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract This study quantifies the less salient yet important impacts of land titling on the adoption of sustainable agricultural practices (SAPs) in the context of Vietnam. Exploiting the within-plot variation in titling status, we find that land titling is positively associated with the implementation of SAPs. Specifically, being given formal titles to land makes Vietnamese rural households 6.58, 3.65, and 1.97 percentage points more likely to invest in soil-water conservation, adopt crop rotation, and leave the land fallow, respectively. These estimates represent increases of 8.7, 20.9, and 2 % compared to the sample averages, respectively. Given the substantial stress on the agricultural system generated by conventional farming, raising the adoption of SAPs could improve food security and alleviate hunger. Our findings also imply that strengthening land property rights through land titling can help us achieve sustainable development goals. The study calls for intensified policy efforts to make sure that formal land use certificates are issued for all farmlands.
{"title":"Land Titling and Sustainable Agricultural Practices in Vietnam","authors":"M. Nguyen","doi":"10.1515/roe-2022-0071","DOIUrl":"https://doi.org/10.1515/roe-2022-0071","url":null,"abstract":"Abstract This study quantifies the less salient yet important impacts of land titling on the adoption of sustainable agricultural practices (SAPs) in the context of Vietnam. Exploiting the within-plot variation in titling status, we find that land titling is positively associated with the implementation of SAPs. Specifically, being given formal titles to land makes Vietnamese rural households 6.58, 3.65, and 1.97 percentage points more likely to invest in soil-water conservation, adopt crop rotation, and leave the land fallow, respectively. These estimates represent increases of 8.7, 20.9, and 2 % compared to the sample averages, respectively. Given the substantial stress on the agricultural system generated by conventional farming, raising the adoption of SAPs could improve food security and alleviate hunger. Our findings also imply that strengthening land property rights through land titling can help us achieve sustainable development goals. The study calls for intensified policy efforts to make sure that formal land use certificates are issued for all farmlands.","PeriodicalId":48456,"journal":{"name":"Review of Economics and Statistics","volume":null,"pages":null},"PeriodicalIF":8.0,"publicationDate":"2023-08-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"89436521","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract We analyse the impact of the temporary tax reduction on diesel and gasoline prices from June to the end of August 2022 in Germany. By implementing a synthetic difference-in-differences approach with different baskets of European countries, we find a significant reduction in prices by 33.8–34.4 cents per litre for gasoline and 12.2–14.6 cents per litre for diesel. These results are robust to variations of countries as well as different time periods analysed. Therefore, we conclude that the temporary reduction of the tax rate on gasoline and diesel was passed through to consumers by rates of 97 %–99 % for gasoline and 75 %–86 % for diesel, respectively. However, these pass-on rates do not imply a high level of competition. On the contrary, an increase in prices before the introduction of the tax cut and an increase before the end of the discount tend to indicate less intense competition.
{"title":"The Impact of the Tax Reduction on Fuel Prices in Germany – A Synthetic Difference-in-Differences Approach","authors":"Lea Bernhardt, Xenia Breiderhoff, R. Dewenter","doi":"10.1515/roe-2023-0014","DOIUrl":"https://doi.org/10.1515/roe-2023-0014","url":null,"abstract":"Abstract We analyse the impact of the temporary tax reduction on diesel and gasoline prices from June to the end of August 2022 in Germany. By implementing a synthetic difference-in-differences approach with different baskets of European countries, we find a significant reduction in prices by 33.8–34.4 cents per litre for gasoline and 12.2–14.6 cents per litre for diesel. These results are robust to variations of countries as well as different time periods analysed. Therefore, we conclude that the temporary reduction of the tax rate on gasoline and diesel was passed through to consumers by rates of 97 %–99 % for gasoline and 75 %–86 % for diesel, respectively. However, these pass-on rates do not imply a high level of competition. On the contrary, an increase in prices before the introduction of the tax cut and an increase before the end of the discount tend to indicate less intense competition.","PeriodicalId":48456,"journal":{"name":"Review of Economics and Statistics","volume":null,"pages":null},"PeriodicalIF":8.0,"publicationDate":"2023-08-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"77065131","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"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 examines Rwanda’s debt-inflation dynamics and the asymmetric effect of government debt on inflation using time series data spanning the years 1980–2021. The study applied a battery of tests to examine the debt-inflation linkage in this country, including the bounds F-test for cointegration, the Brock-Dechert-Scheinkman (BDS) nonlinearity test, the Wald test for asymmetries and the nonlinear autoregressive distributed lag (NARDL) model for short run and long run asymmetric impact. The results of the NARDL bounds F-test for cointegration support a long-run nonlinear link between public debt and inflation in Rwanda. The findings of the BDS test reveal that the series is nonlinear in all dimensions, whereas the results of the Wald test show that public debt has an asymmetric impact on inflation, regardless of the timescale considered. The NARDL findings show that while a rise in public debt tends to be inflationary in the short run, a decline in public debt typically leads to a decrease in inflation in the long run. The study also demonstrates that inflation responds more rapidly and strongly to positive than negative shocks in public debt. The country should think about continuous enforcement of fiscal consolidation measures and reforms, as well as implementing economic growth-friendly policies to reduce debt increases in the short run. This will induce a decline in inflation and enhance macroeconomic stability in the long run.
{"title":"Non-Linear Impact of Public Debt on Inflation in Rwanda","authors":"Talknice Saungweme, Glenda Maluleke, N. Odhiambo","doi":"10.1515/roe-2023-0049","DOIUrl":"https://doi.org/10.1515/roe-2023-0049","url":null,"abstract":"Abstract This paper examines Rwanda’s debt-inflation dynamics and the asymmetric effect of government debt on inflation using time series data spanning the years 1980–2021. The study applied a battery of tests to examine the debt-inflation linkage in this country, including the bounds F-test for cointegration, the Brock-Dechert-Scheinkman (BDS) nonlinearity test, the Wald test for asymmetries and the nonlinear autoregressive distributed lag (NARDL) model for short run and long run asymmetric impact. The results of the NARDL bounds F-test for cointegration support a long-run nonlinear link between public debt and inflation in Rwanda. The findings of the BDS test reveal that the series is nonlinear in all dimensions, whereas the results of the Wald test show that public debt has an asymmetric impact on inflation, regardless of the timescale considered. The NARDL findings show that while a rise in public debt tends to be inflationary in the short run, a decline in public debt typically leads to a decrease in inflation in the long run. The study also demonstrates that inflation responds more rapidly and strongly to positive than negative shocks in public debt. The country should think about continuous enforcement of fiscal consolidation measures and reforms, as well as implementing economic growth-friendly policies to reduce debt increases in the short run. This will induce a decline in inflation and enhance macroeconomic stability in the long run.","PeriodicalId":48456,"journal":{"name":"Review of Economics and Statistics","volume":null,"pages":null},"PeriodicalIF":8.0,"publicationDate":"2023-08-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"88109991","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
L. Cherchye, T. Demuynck, B. De Rock, Joshua Lanier
We present a statistical test for the hypothesis of (approximate) utility maximization on the basis of nonparametric revealed preference conditions. We take as null hypothesis that the consumer behaves randomly, and we reject this hypothesis only if the data provides sufficient evidence to support the alternative hypothesis of approximate utility maximization. Our statistical test uses a permutation method to operationalize the principle of random consumption behavior. We show that our test (i) is valid for any sample size under the null and (ii) has an asymptotic power of one. We also provide simulated power results and two empirical applications.
{"title":"Are Consumers (Approximately) Rational? Shifting the Burden of Proof","authors":"L. Cherchye, T. Demuynck, B. De Rock, Joshua Lanier","doi":"10.1162/rest_a_01360","DOIUrl":"https://doi.org/10.1162/rest_a_01360","url":null,"abstract":"\u0000 We present a statistical test for the hypothesis of (approximate) utility maximization on the basis of nonparametric revealed preference conditions. We take as null hypothesis that the consumer behaves randomly, and we reject this hypothesis only if the data provides sufficient evidence to support the alternative hypothesis of approximate utility maximization. Our statistical test uses a permutation method to operationalize the principle of random consumption behavior. We show that our test (i) is valid for any sample size under the null and (ii) has an asymptotic power of one. We also provide simulated power results and two empirical applications.","PeriodicalId":48456,"journal":{"name":"Review of Economics and Statistics","volume":null,"pages":null},"PeriodicalIF":8.0,"publicationDate":"2023-07-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47687809","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We study the effect of raising the level and transparency of financial incentives offered to local agents for acquiring clients of a new banking product on take-up. We find that paying agents higher incentives increases take-up and usage, but only when the incentives are unknown to prospective clients. When disclosed, higher incentives have no effect on take-up and usage, despite greater agent effort. This is due to the financial incentives sending a negative signal to potential clients about the reliability and trustworthiness of the product. Hence, when designing incentives, organizations should consider both their level and transparency.
{"title":"When Transparency Fails: Financial Incentives for Local Banking Agents in Indonesia","authors":"Erika Deserranno, Gianmarco León-Ciliotta, Firman Witoelar","doi":"10.1162/rest_a_01359","DOIUrl":"https://doi.org/10.1162/rest_a_01359","url":null,"abstract":"\u0000 We study the effect of raising the level and transparency of financial incentives offered to local agents for acquiring clients of a new banking product on take-up. We find that paying agents higher incentives increases take-up and usage, but only when the incentives are unknown to prospective clients. When disclosed, higher incentives have no effect on take-up and usage, despite greater agent effort. This is due to the financial incentives sending a negative signal to potential clients about the reliability and trustworthiness of the product. Hence, when designing incentives, organizations should consider both their level and transparency.","PeriodicalId":48456,"journal":{"name":"Review of Economics and Statistics","volume":null,"pages":null},"PeriodicalIF":8.0,"publicationDate":"2023-07-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"49412264","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We report the results of two experiments designed to better understand the mechanisms driving decision-making under ambiguity. We elicit individual preferences over different sources of uncertainty, entailing different degrees of complexity, from subjects with different sophistication levels. We show that (1) ambiguity aversion is robust to sophistication, but the strong relationship previously reported between attitudes toward ambiguity and compound risk is not. (2) Ellsberg ambiguity attitude can be partly explained by attitudes toward complexity for less sophisticated subjects only. Overall, regardless of the subject's sophistication level, the main driver of Ellsberg ambiguity attitude is a specific treatment of unknown probabilities.
{"title":"Unraveling Ambiguity Aversion","authors":"I. Aydogan, L. Berger, V. Bosetti","doi":"10.1162/rest_a_01358","DOIUrl":"https://doi.org/10.1162/rest_a_01358","url":null,"abstract":"\u0000 We report the results of two experiments designed to better understand the mechanisms driving decision-making under ambiguity. We elicit individual preferences over different sources of uncertainty, entailing different degrees of complexity, from subjects with different sophistication levels. We show that (1) ambiguity aversion is robust to sophistication, but the strong relationship previously reported between attitudes toward ambiguity and compound risk is not. (2) Ellsberg ambiguity attitude can be partly explained by attitudes toward complexity for less sophisticated subjects only. Overall, regardless of the subject's sophistication level, the main driver of Ellsberg ambiguity attitude is a specific treatment of unknown probabilities.","PeriodicalId":48456,"journal":{"name":"Review of Economics and Statistics","volume":null,"pages":null},"PeriodicalIF":8.0,"publicationDate":"2023-07-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"41737823","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In a macroeconomic model with drifting long-run inflation expectations, the anchoring of inflation expectations manifests in two testable predictions. First, expectations about inflation far in the future should no longer respond to news about current inflation. Second, better anchored inflation expectations weaken the relationship between unemployment and inflation, flattening the reduced-form Phillips curve. We evaluate both predictions and find that the Federal Reserve's communication of a numerical inflation objective, first through its Summary of Economic Projections and later through the announcement of a 2 percent target in 2012, better anchored inflation expectations. Moreover, inflation expectations in the United States have remained anchored amid the volatility of the COVID-19 pandemic. In contrast, similar analysis reveals no evidence of anchoring in Japan despite the adoption of a numerical inflation target.
{"title":"Did the Federal Reserve Break the Phillips Curve? Theory & Evidence of Anchoring Inflation Expectations","authors":"Brent H. Bundick, A. L. Smith","doi":"10.1162/rest_a_01357","DOIUrl":"https://doi.org/10.1162/rest_a_01357","url":null,"abstract":"In a macroeconomic model with drifting long-run inflation expectations, the anchoring of inflation expectations manifests in two testable predictions. First, expectations about inflation far in the future should no longer respond to news about current inflation. Second, better anchored inflation expectations weaken the relationship between unemployment and inflation, flattening the reduced-form Phillips curve. We evaluate both predictions and find that the Federal Reserve's communication of a numerical inflation objective, first through its Summary of Economic Projections and later through the announcement of a 2 percent target in 2012, better anchored inflation expectations. Moreover, inflation expectations in the United States have remained anchored amid the volatility of the COVID-19 pandemic. In contrast, similar analysis reveals no evidence of anchoring in Japan despite the adoption of a numerical inflation target.","PeriodicalId":48456,"journal":{"name":"Review of Economics and Statistics","volume":null,"pages":null},"PeriodicalIF":8.0,"publicationDate":"2023-07-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"139355873","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
A growing literature has shown that people sometimes prefer to randomize between two options. We investigate how prevalent this behavior is in an experiment using a novel and simple method. Subjects face a list of questions in which one of the alternatives is fixed and the other varies, like a Multiple Price List, but in each row they can randomize between the options. We find that the majority of subjects chose to randomize in the majority of questions, and notably, they did so for ranges of values that were “very large.”
{"title":"Ranges of Randomization","authors":"Marina Agranov, Pietro Ortoleva","doi":"10.1162/rest_a_01355","DOIUrl":"https://doi.org/10.1162/rest_a_01355","url":null,"abstract":"\u0000 A growing literature has shown that people sometimes prefer to randomize between two options. We investigate how prevalent this behavior is in an experiment using a novel and simple method. Subjects face a list of questions in which one of the alternatives is fixed and the other varies, like a Multiple Price List, but in each row they can randomize between the options. We find that the majority of subjects chose to randomize in the majority of questions, and notably, they did so for ranges of values that were “very large.”","PeriodicalId":48456,"journal":{"name":"Review of Economics and Statistics","volume":null,"pages":null},"PeriodicalIF":8.0,"publicationDate":"2023-07-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"46741364","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We highlight that analyses using interaction terms to study treatment effect heterogeneity are susceptible to a form of omitted variable bias that is often overlooked in economics. Unlike most instances of omitted variable bias, the omitted variables in this case are available to the researcher but were not included in the model. We demonstrate that this exclusion matters based on a replication of 205 estimates across 17 papers published in the American Economic Review over a five-year period. For approximately 60% of these papers, failing to account for the omitted variables changes the majority of estimates by more than 100%.
{"title":"Omitted Variable Bias in Interacted Models: A Cautionary Tale","authors":"B. Feigenberg, Ben Ost, Javaeria Qureshi","doi":"10.1162/rest_a_01361","DOIUrl":"https://doi.org/10.1162/rest_a_01361","url":null,"abstract":"\u0000 We highlight that analyses using interaction terms to study treatment effect heterogeneity are susceptible to a form of omitted variable bias that is often overlooked in economics. Unlike most instances of omitted variable bias, the omitted variables in this case are available to the researcher but were not included in the model. We demonstrate that this exclusion matters based on a replication of 205 estimates across 17 papers published in the American Economic Review over a five-year period. For approximately 60% of these papers, failing to account for the omitted variables changes the majority of estimates by more than 100%.","PeriodicalId":48456,"journal":{"name":"Review of Economics and Statistics","volume":null,"pages":null},"PeriodicalIF":8.0,"publicationDate":"2023-07-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"43475837","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"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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