HOW DO SPEED AND SECURITY INFLUENCE CONSUMERS' PAYMENT BEHAVIOR?

The Federal Reserve named improvements in the speed and security of the payment system as two of its policy initiatives for 2012–2016. Using new data from the 2013 Survey of Consumer Payment Choice (SCPC) and models from earlier research, we estimate how various aspects of speed and security influence consumers' decisions to adopt and use payment instruments. Some aspects of speed and security have a statistically significant influence on the adoption and use of selected payment instruments, but not as much as other characteristics of payment instruments. Using econometric models to simulate selected policies proposed by the Fed, we show that faster speed of payment deduction for Automatic Clearing House (ACH) transactions would slightly increase consumers' adoption of ACH‐based payment methods, while enhanced security of payment cards would marginally increase the use of credit and debit cards. However, neither improvement is likely to increase consumer welfare much because consumer demand for payments is very inelastic with respect to speed and security. Our analysis focuses exclusively on consumers' behavior and does not include potential benefits of improvements to the payment system that would directly benefit businesses or financial institutions. In addition, preventing security breaches may preserve public confidence in the payment system, benefitting consumers even if they do not change their payment behavior. (JEL D12, D14, E58)     

Local and global spatial effects in hierarchical models

Hierarchical models have a long history in empirical applications; recognition of the fact that many datasets of interest to applied econometricians are nested; counties within states, pupils within school, regions within countries, etc. Just as many datasets are characterized by nesting, many are also characterized by the presence of spatial dependence or spatial heterogeneity. Significant advances have been made in developing econometric techniques and models to allow applied econometricians to address this spatial dimension to their data. This article fuses these two literatures together and combines a hierarchical model with the two general spatial econometric models.     

DATA‐DRIVEN DRAFTING: APPLYING ECONOMETRICS TO EMPLOY QUARTERBACKS

We show that firms can employ data‐driven methods to improve their hiring decisions. Specifically, we use data available to National Football League (NFL) teams prior to the NFL draft to estimate econometric models that predict the future performance of drafted quarterbacks. As our methods are replicable, stakeholders can use them to improve the draft's efficiency and help it accomplish its mission to promote competitive balance. Furthermore, data‐driven methods such as ours can help firms avoid biases against employee characteristics that do not affect future job performance. (JEL L83)     

Bootstrap Methods in Econometrics*

There are many bootstrap methods that can be used for econometric analysis. In certain circumstances, such as regression models with independent and identically distributed error terms, appropriately chosen bootstrap methods generally work very well. However, there are many other cases, such as regression models with dependent errors, in which bootstrap methods do not always work well. This paper discusses a large number of bootstrap methods that can be useful in econometrics. Applications to hypothesis testing are emphasized, and simulation results are presented for a few illustrative cases.     

中国人均GDP的空间相关与地区收敛:1978-2003

本文运用探索性空间数据分析方法研究了中国30个省份人均GDP之间的空间相关性,结果表明,自改革开放以来,中国各地区人均收入的空间相关逐年加强。通过计算局部空间自相关指标,本文进一步验证了中国经济中空间异质性的存在,即地区人均收入与地理位置密切相关。在此基础上,本文运用三种不同的空间经济计量模型研究了中国各省份人均GDP增长的收敛性。结果表明,空间自回归模型和广义空间模型不能正确拟合中国省级地区增长数据,而空间误差自回归模型能够满意地解释中国省级地区经济增长,这表明地理位置的影响尽管对各地区的经济增长造成了深刻的影响,但并没有改变地区经济增长的收敛趋势。空间误差自回归模型还显示劳动力和资本流动以及知识溢出在省级地区水平上是显著存在的,并且有利于地区经济增长的收敛。     

Advances in specification testing

Testing the specification of econometric models has come a long way from the t tests and F tests of the classical normal linear model. In this paper, we trace the broad outlines of the development of specification testing, along the way discussing the role of structural versus purely statistical models. Inferential procedures have had to advance in tandem with techniques of estimation, and so we discuss the generalized method of moments, non parametric inference, empirical likelihood and estimating functions. Mention is made of some recent literature, in particular, of weak instruments, non parametric identification and the bootstrap.     

Estimating exchange rate dynamics with diffusion processes: an application to Greek EMU data

Recently various exchange rate models capturing the dynamics during the transition from an exchange rate arrangement of floating rates into a currency union have been derived. Technically, these stochastic equilibrium models are diffusion processes which have to be estimated by discretely sampled observations. Using daily exchange rate data prior to the Greek EMU-entrance on 1 January 2001, we develop a rigorous estimation procedure. Our estimates point to an increasing interventionist economic policy in the run-up to the Greek EMU entrance. A comparison of this econometric indication with policy information provided (ex-post) by the Bank of Greece (BoG) in its Annual Report 2000 reveals that the BoG indeed pursued such an active policy stance (so-called institutional frontloading strategies).      

盈余管理的计量模型研究综述

目前存在三类盈余管理计量模型：(1)总应计利润模型；(2)具体应计利润模型；(3)盈余及应计利润分布模型。本文对这三类模型进行了分析和研究,指出当前的盈余管理计量模型还存在许多问题,尤其是在研究处于转轨经济时期的中国盈余管理问题时。同时,提出发展一种更有效的计量盈余管理模型仍然是业界重要的工作。     

Environmental Kuznets Curve: Conclusive Econometric Evidence for CO2

This paper begins with a statistical formulation of the Environmental Kuznets Curve (EKC) and discusses the major econometric problems raised in the literature in testing this hypothesis using panel data. A simple t‐test is then presented that avoids these econometric problems. The result from applying the t‐test confirms conclusively the EKC for CO₂ as formulated.     

Likelihood Inference on Semiparametric Models: Average Derivative and Treatment Effect

Over the past few decades, much progress has been made in semiparametric modelling and estimation methods for econometric analysis. This paper is concerned with inference (i.e. confidence intervals and hypothesis testing) in semiparametric models. In contrast to the conventional approach based on t‐ratios, we advocate likelihood‐based inference. In particular, we study two widely applied semiparametric problems, weighted average derivatives and treatment effects, and propose semiparametric empirical likelihood and jackknife empirical likelihood methods. We derive the limiting behaviour of these empirical likelihood statistics and investigate their finite sample performance through Monte Carlo simulation. Furthermore, we extend the (delete‐1) jackknife empirical likelihood toward the delete‐d version with growing d and establish general asymptotic theory. This extension is crucial to deal with non‐smooth objects, such as quantiles and quantile average derivatives or treatment effects, due to the well‐known inconsistency phenomena of the jackknife under non‐smoothness.     

The breakdown of the IS–LM synthesis: implications for post-Keynesian economic theory

The monetarist and the new classical economics attack routed the IS–LM version of Keynesian theory and the large scale econometric models from the centre of macroeconomic research. However monetarism and the new classical economics were more successful as a critique of the IS–LM orthodoxy than as a basis for fruitful research and policy analysis.

Post-Keynesian economists also attack the IS–LM orthodoxy, mainly because it misspecified ‘… the economic society in which we actually live’. Post-Keynesians that emphasized financial and labour markets argued that properties of the real world economy made instability normal results ofmarket interactions.

The vacuum in main line theory that developed as the shortcomings of monetarism became evident led to a revival of interest in basic Keynesian propositions. This has spawned what is now labeled a new Keynesian economics. New Keynesian economists conform to the modeling standards set by the new classical rational expectations school but claim to get Keynesian results. To a degree these results are compatible with propositions of post-Keynesian economics.

It is suggested that a convergence between the new and the post-Keynesian economics can be expected, and the result is likely to be fruitful.     

THE REGULATION OF MIGRATION IN A TRANSITION ECONOMY: CHINA'S HUKOU SYSTEM

Unlike most countries, China regulates internal migration. Access to public schools, health services, low‐cost housing, and attractive jobs by those who do not have local registration (Hukou) is often limited. Coincident with the deepening of economic reforms, Hukou has gradually been relaxed since the 1980s, contributing to a migration surge. In this study of interprovincial Chinese migration, we address two questions. First, what is a sensible way of incorporating Hukou into theoretical and empirical models of migration in China? Second, to what extent has Hukou influenced the scale and structure of migration? We incorporate two different measures of Hukou into a modified gravity model nuanced to fit the Chinese case: (1) the migrant's perceived probability of securing Hukou and (2) the perceived joint probability of securing Hukou and a job available only to a registered person. Our tests include a much wider variety of controls especially important for the Chinese case. Using census data for 1985–90, 1995–2000, and 2000–05, we find that migration is very sensitive to Hukou, with the greatest sensitivity occurring during the middle period. (JEL J61)     

The Global Disconnect: The Role of Transactional Distance and Scale Economies in Gravity Equations

Recent empirical analyses show that asset flows can be modelled by the same 'gravity' equations that trade economists have used so successfully for the past few decades. This is something of a surprise. Trade economists do not yet have a unified theory of why gravity models should work‐and the situation is worse for asset flows. Reasonable theories would predict that greater distance between countries should generate more asset flows rather than less as the econometric results seem to consistently show. In this paper we discuss how host and source country GDPs, language, and distance the core explanatory variables in the traditional gravity models‐fare in trade and asset flows estimations. While the 'distance puzzle' is not resolved, it is considerably reduced by going beyond consideration of physical distance to concepts of transactional distance and scale economies.     

An Empirical Analysis of Australian Strike Activity: Estimating the Industrial Relations Effect of the First Three Years of the Prices and Incomes Accord*

Australian strike activity war relatively low in the 1983(2)-1986(1) period. Some part of this experience is attributable to changes in the macroeconomic environment and some is a consequence of improvements in industrial relations. This paper attempts to determine the role of each by estimating econometric models for the 1959(3)-1983(1) period and forecasting indicators of strike activity over the subsequent three years. We find that working days lost per unionist decreased because of macroeconomic conditions, but that these variables explain less than half of the actual decline. This suggests that, for the initial three-year period of its institution, the Accord helped deliver a favorable industrial relations environment, a situation that is not necessarily long-lasting. More generally, the results show strike activity to be pro-cyclical and influenced by profits and inflation.     

Estimating the Parameters of Principal Agent Models

The estimation of principal agent models is a subset of inverse optimal problems. As of now there is no consistent method of estimating all its parameters. In general, some proxies for the parameters have been utilized to test plausible economic implications of such models. This study develops a method of estimation for all the parameters using a very limited time series data for one contracting pair. Progress towards empirical reality, based on stylized facts, has been achieved by iteratively modifying the theoretical models and econometric methods. One of these results provides a theoretical justification for the econometric tools utilized in practice as well. However, a fundamental modification of the underlying assumptions is necessary. Given the emphasis on contracts in economic exchange it is necessary to develop the methods further. The study also outlines some of the pertinent issues.

     

Econometric Specification and Identification of the Behavior of Economic Agents

The present study examines the combination of economic theory, structure of the econometric model, and estimation techniques to extract the maximum possible information about the behavior of economic agents from observed decisions. The analysis is set in the framework of micro economic behavior and industrial organization. The relevant theoretical structures generally assume optimization behavior of economic agents. However, optimization models do not have a unique structure and are generally difficult to identify. Consequently, a variety of second best specification and estimation methods emerged. But they entail loss of information. Hence, greater efforts devoted to the identification of optimization models will enrich our understanding of economic behavior. Progress in this direction will eventually render a vast majority of existing econometric techniques obsolete.

     

Prior Commitment and Uncertainty in Complex Economic Systems: Reinstating History in the Core of Economic Analysis

Conventional ‘neoclassical’ economics is very useful in understanding how prices are determined but less so as a general basis for understanding the economic behaviour we observe. What is not taken into account is that economic systems are dissipative structures that are complex, but incompletely connected, networks of rules. It is explained why a degree of prior commitment in decision‐making is inevitable in complex economic systems and the implications of this are examined. It is argued that economic analysis must begin with the reality that choices are made in relation to pre‐existing commitments, both with regard to economic structures built in the past and to prevailing systems of belief, when deciding what to do in a future characterised by uncertainty. It is explained how conventional economic incentives can be dealt with in such a complex historical context building upon the neoclassical perspective of Alfred Marshall over a century ago. It is argued that econometric modelling remains viable and useful in understanding behaviour in complex economic systems. It is shown how we can design and interpret time series econometric modelling from a complex systems perspective.     

An economic agent in my brain? A critical analysis of multiple-self models in neuroeconomics

Neuroeconomic multiple-self models describe individuals’ choices as the equilibrium of the interaction amongst neural sites modelled as economic agents. This approach aims at explaining some inter-temporal inconsistency problems and the rejection of unfair offers in ultimatum games. However, the experiments on these models do not provide replicable results. The standard view interprets this problem as due to inadequate econometric techniques. Conversely, this paper shows that the non-replicability problem arises from a conundrum of multiple-self models’ (MSMs) theory. It illustrates how the assumption of neuroeconomic agents is deduced from the revealed preferences theory applied to the neuro-level. Therefore, the paper shows how experiments on MSMs cannot test the assumption of neuroeconomic agents but only the empirical hypotheses that derive from it. This entails that the assumption of neuroeconomic agents is a tautology, which might generate hypotheses that do not robustly identify the neural correlates of behaviour.     

Evidence on the impact of R&D and ICT investments on innovation and productivity in Italian firms

Both research and development (R&D) and information and communication technology (ICT) investment have been identified as sources of relative innovation underperformance in Europe vis-à-vis the USA. In this article, we investigate the R&D and ICT investment at the firm level in an effort to assess their relative importance and to what extent they are complements or substitutes. We use data on a large unbalanced panel data sample of Italian manufacturing firms constructed from four consecutive waves of a survey of manufacturing firms, to estimate a version of the CDM model of R&D, innovation, and productivity [Crépon–Duguet–Mairesse 1998. Research, innovation and productivity: An econometric analysis at the firm level. Economics of Innovation and New Technology 7, no. 2: 115–58] that has been modified to include ICT investment and R&D as the two main inputs into innovation and productivity. We find that R&D and ICT are both strongly associated with innovation and productivity, with R&D being more important for innovation, and ICT investment being more important for productivity. For the median firm, rates of return to both investments are so high that they suggest considerably underinvestment in both these activities. We explore the possible complementarity between R&D and ICT in innovation and production, but find none, although we do find complementarity between R&D and worker skill in innovation.     

RACIAL DISPARITIES IN FEDERAL DISABILITY BENEFITS

We estimate racial differences in the Social Security Administration’s (SSA) decision to award federal disability benefits using newly available data, multivariate econometric models, and Oaxaca decomposition methods. We focus on the appellate level of SSA’s disability decision‐making process. We find that for claimants represented by attorneys there is no statistically significant difference in benefit award rates between whites and African‐Americans. However, for claimants without attorney representation, we find sizable and significant differences between whites and African‐Americans. (JEL J15, H53)