1. T. N. Cason, T. Sharma and R. Vadovic, "Correlated beliefs: Predicting outcomes in 2×2 games", Games and Economic Behavior: Volume 122, July 2020, Pages, 256-276.
Abstract:
Studies of strategic sophistication in experimental normal form games commonly assume that subjects' beliefs are consistent with independent choice. This paper examines whether beliefs are consistent with correlated choice. Players play a sequence of 2×2 normal form games with distinct opponents and no feedback. Another set of players, called predictors, report a likelihood ranking over possible outcomes. A substantial proportion of the reported rankings are consistent with the predictors believing that the choice of actions in the 2×2 game are correlated. Predictions seem to be correlated around focal outcomes and the extent of correlation over action profiles varies systematically between games (i.e., prisoner's dilemma, stag hunt, coordination, and strictly competitive).
2. E. Alberola and C. Urrutia, "Does Informality facilitate Inflation Stability?", Journal of Development Economics. Vol. 146, 2020
Abstract:
Informality is an entrenched structural trait in emerging market economies, despite of the progress achieved in macroeconomic management. Informality determines the behavior of labour markets, financial access and the productivity of the overall economy. Therefore it influences the transmission of shocks and also of monetary policy. This paper develops a simple general equilibrium closed economy model with nominal rigidities, labor and financial frictions. Informality is captured by a dual labour market where the share of informal workers is endogenous. Only formal sector firms have access to financing, which is instrumental in their production process. Informality has a buffering effect on the propagation of demand and supply shocks to prices; the financial feature of the model exacerbates the impact of financial shocks in the formal sector while the informal sector is in principle unaffected. As a result informality dampens the impact of demand and financial shocks on wages and inflation but heighten the impact of technology shocks. Informality also increases the sacrifice ratio of monetary policy actions. From a Central Bank perspective, the results imply that the presence of an informal sector mitigates inflation volatility for some type of shocks but makes monetary policy less effective.
3. G. Leyva and C. Urrutia "Informality, Labor Regulation, and the Business Cycle", Journal of International Economics, Vol. 126, 2020..
Abstract:
We analyze the joint impact of labor regulation and informality on macroeconomic volatility and the propagation of shocks in emerging economies. For this, we propose a small open economy business cycle model with frictional labor markets, endogenous labor participation, and an informal sector. Our own calculations from the ENOE national household survey reveal that these three margins are important to account for the labor market dynamics in Mexico. The model is calibrated to the Mexican economy, in particular to business cycle moments for employment and informality. We show that interest rate shocks, which affect specifically job creation in the formal sector, are key to obtain a countercyclical informality rate. In our model, the presence of an informal sector might help to mitigate the impact of a stringent labor regulation on employment and consumption fluctuations. In that sense, it adds flexibility to the economy in its adjustment to shocks, but at the cost of a lower productivity and an excess TFP and output volatility. Reducing the burden of labor regulation to the formal sector might achieve the goal of reducing output volatility while improving at the same time the efficiency in the allocation of resources.
4. A. Elbittar, A. Gomberg, C.Martinelli, and T. Palfrey, "Ignorance and bias in collective decisions", Journal of Economic Behavior & Organization Vol. 174, 2020, p. 332-359.
Abstract:
We consider a committee with common interests. Committee members do not know which of two alternatives is the best, but each member may acquire privately a costly signal before casting a vote under either majority or unanimity rule. In the lab, as predicted by Bayesian equilibrium, voters are more likely to acquire information under majority rule, and attempt to counter the bias built in favor of one alternative under unanimity rule. As opposed to Bayesian equilibrium predictions, however, some committee members vote for either alternative when uninformed. Moreover, uninformed voting is correlated with a lower disposition to acquire information. We show that an equilibrium model of subjective prior beliefs may account for this correlation, and provides a good fit for the observed patterns of behavior both in terms of rational ignorance and biases.
5. M. Romero, J. Sandefur, and W. A. Sandholtz. "Outsourcing Education: Experimental Evidence from Liberia", American Economic Review, Volume 110, No. 2, 2020
Abstract:
In 2016, the Liberian government delegated management of 93 randomly selected public schools to private providers. Providers received US$50 per pupil, on top of US$50 per pupil annual expenditure in control schools. After one academic year, students in outsourced schools scored 0.18σ higher in English and mathematics. We do not find heterogeneity in learning gains or enrollment by student characteristics, but there is significant heterogeneity across providers. While outsourcing appears to be a cost-effective way to use new resources to improve test scores, some providers engaged in unforeseen and potentially harmful behavior, complicating any assessment of welfare gains.
6. T. Dewan, J. Meriläinen and J. Tukiainen. "Victorian Voting: The Origins of Party Orientation and Class Alignment", American Journal of Political Science. Volume 64, Number 4, October 2020, Pages 869-886.
Abstract:
Much of what we know about the alignment of voters with parties comes from mass surveys of the electorate in the postwar period or from aggregate electoral data. Using individual elector‐level panel data from nineteenth‐century United Kingdom poll books, we reassess the development of a party centered electorate. We show that (a) the electorate was party‐centered by the time of the extension of the franchise in 1867, (b) a decline in candidate‐centered voting is largely attributable to changes in the behavior of the working class, and (c) the enfranchised working class aligned with the Liberal left. This early alignment of the working class with the left cannot entirely be explained by a decrease in vote buying. The evidence suggests instead that the alignment was based on the programmatic appeal of the Liberals. We argue that these facts can plausibly explain the subsequent development of the party system.
7. F. Meza, S. Pratap and C. Urrutia. "Credit and investment distortions: Evidence from Mexican manufacturing", Ecomics Letters. Vol. 197, 2020
Abstract:
We document a transmission channel from credit conditions to capital accumulation via investment wedges. Using a simple multi-industry model of production and investment, we measure these wedges at the 4-digit industry level from Mexican manufacturing and show that they account for most of the changes in aggregate capital over time. We also find a robust relation between the wedges and financial variables: credit and interest rates, also measured at the industry level.
8.. Gutierrez, E., & Rubli, A. "Local Water Quality, Diarrheal Disease, and the Unintended Consequences of Soda Taxes",The World Bank Economic Review. April 19, 2020.
Abstract:
Could taxing sugar-sweetened beverages in areas where clean water is unavailable lead to increases in diarrheal disease? An excise tax introduced in Mexico in 2014 led to a significant 6.6 percent increase in gastrointestinal disease rates in areas lacking safe drinking water throughout the first year of the tax, with evidence of a diminishing impact in the second year. Suggestive evidence of a differential increase in the consumption of bottled water by households without access to safe water two years post-tax provides a potential explanation for this declining pattern. The costs implied by these results are small, particularly compared to tax revenues and the potential public health benefits. However, these findings inform the need for accompanying soda taxes with policy interventions that guarantee safe drinking water for vulnerable populations.
9. Alberto Simpser and Cristian Challú, "The Quality of Votes Tallies: Causes and Consequences", American Journal of Political Science, 114 - 4, November 2020, pp. 1071-1085.
Abstract:
The credibility of election outcomes hinges on the accuracy of vote tallies. Most democracies count votes by hand, yet we know little about the causes and consequences of inaccuracies in the vote tallies. Using data for the universe of polling stations in Mexico in five national elections, we show that over forty percent of polling-station-level tallies display arithmetic inconsistencies. Inconsistencies appear to be non-partisan, but they are a major cause of recounts and they erode public trust in electoral institutions. Drivers of inconsistencies include the education of those in charge of tallying the votes, their workload, and the complexity of the tallying tasks. Our findings highlight an unsuspected connection between socioeconomic development and election quality, and they speak to ongoing debates about human vs. machine-based vote counting.
10.. P. Basu, K. Chatterjee, T. Hoshino and Omer Tamuz, "Repeated Coordination with Private Learning", Journal of Economic Theory, Volumen 190, Noviembre 2020.
Abstract:
We study a repeated game with payoff externalities and observable actions where two players receive information over time about an underlying payoff-relevant state, and strategically coordinate their actions. Players learn about the true state from private signals, as well as the actions of others. They commonly learn the true state (Cripps et al., 2008), but do not coordinate in every equilibrium. We show that there exist stable equilibria in which players can overcome unfavorable signal realizations and eventually coordinate on the correct action, for any discount factor. For high discount factors, we show that in addition players can also achieve efficient payoffs.
11. Manuel A. Domínguez & Ignacio N. Lobato "Specification testing with estimated variables", Econometric Reviews, Volume 39, 2020 -Issue 5.
Abstract:
This article proposes specification tests for economic models defined through conditional moments restrictions in which conditioning variables are estimated. There are two main motivations for this situation. First, the case when the conditioning variables are not directly observable, such as economic models, where innovations or latent variables appear as explanatory variables. Second, the case when the set of conditioning variables is too large to derive powerful tests, and hence, the original conditioning set is replaced by a constructed variable that is regarded as a good summary of it. We establish the asymptotic properties of the proposed tests, examine its finite sample behavior, and apply them to different econometric contexts. In some cases, the proposed approach leads to relevant tests that generalize well known specification tests, such as Ramsey’s RESET test.
12. Ryan Lampe and Romans Pancs. "Mean Reversion in Investment Decisions; The Case of Hollywood". Journal of Industrial Economics, 2020, Vol. 68, Issue 1, 156-190.
Abstract:
One explanation for the comparatively lower quality of movie sequelsis selection bias, known in personnel economics as the Peter principle.Only abnormally successful movies are selected for a sequel. Anotherexplanation is a deterministic depreciation in quality due to the declinein the novelty of the sequel’s characters and storyline. Both explanationspredict that, relative to the original, the sequel’s performance willrevert towards the mean. We develop a structural model to decomposethe two explanations, and estimate its parameters using detailed dataon 306 franchise films and 2,823 non-franchise films between 1995and 2014. Parameter estimates provide evidence of selection bias foraction & adventure and horror movies, and evidence of a deterministicdecline in quality for comedies.
13. Ignacio N. Lobato y Manuel Domínguez "Specification Testing with Estimated Variables", Econometric Reviews, Volume 39, 2020- Issue 5. Pages 476-494.
Abstract:
This article proposes specification tests for economic models defined through conditional moments restrictions in which conditioning variables are estimated. There are two main motivations for this situation. First, the case when the conditioning variables are not directly observable, such as economic models, where innovations or latent variables appear as explanatory variables. Second, the case when the set of conditioning variables is too large to derive powerful tests, and hence, the original conditioning set is replaced by a constructed variable that is regarded as a good summary of it. We establish the asymptotic properties of the proposed tests, examine its finite sample behavior, and apply them to different econometric contexts. In some cases, the proposed approach leads to relevant tests that generalize well known specification tests, such as Ramsey’s RESET test.