Predicting Household Poverty: A Methodological Note with a Kenyan Example

Household surveys provide data that is used for identifying and measuring the poverty status of households and individuals. However, carrying out such surveys is expensive, especially in poor developing countries. Thus it is important to make maximum use of the available survey data in developing countries, especially in sub‐Saharan Africa, where such data are expensive to collect and analyse. This paper develops a simple method for using poverty indices derived from survey data for a given year, to predict poverty rates for subsequent periods without having to conduct a new household survey. We illustrate the workings of the method with data from Kenyan household surveys for 1994 and 1997.     

Regionalization, public spending and growth: a stylized model dealing with ‘predatory states’

In this paper, a micro-founded model analyzing the effects of ‘regionalization’ on economic activity is developed. It shows that the spatial division of public competencies can have an impact on the growth rate via the efficiency of governmental choices: initially advantageous for weak levels, decentralization (/reduction of regional size) becomes limited due to the risk of underestimation of the real profitability of public expenditure by local governments (non-internalized cross-border effects). In accordance with the theory, a transversal estimation for a sample of 51 countries for the 1990s establishes a ‘bell-shaped’ relation between indicators of regionalization and the quality of governance.     

Understanding Configuration and Transformation through a Multiple Rationalities Approach

Why are some transformational change attempts implemented while others are rejected? This study suggests that patterns of underlying multiple rationalities commitments help to explain. Data from four periods of configuration and 11 transformational change attempts spanning a 40-year organizational history are analysed using a multiple rationalities framework. The findings suggest that transformational change attempts are ubiquitous, that transformational changes are more likely to be implemented if supported primarily by value-based rationality, and that organizational members' support for an incumbent configuration increases over time. The conclusion calls for a reconceptualization of configuration, and the inclusion of rejected change attempts in future studies of change and stability.     

On Labour Market Policies and Aggregate Unemployment Outflows

This paper is interested in the modelling of the relationship between active and passive labour market policies and the aggregate unemployment outflow rate. Our model is based on a matching function and includes a simple representation of the competition between various groups of job searchers. The empirical analysis uses Belgian data. Faced with variables that are often integrated of order 1 according to the usual tests but which cannot strictly speaking be integrated, we contribute to an important methodological debate by comparing the conclusions of a classical econometric analysis and a cointegration approach.     

The Effects of Screening and Monitoring on Credit Rationing of SMEs

In this paper, we seek to empirically assess which determinants of the capability and incentives of banks to screen and monitor firms are significant in explaining credit rationing to Italian SMEs. After testing for the presence of non‐random selection bias and the potential endogeneity of some determinants of interest, the probit model results we obtain suggest that the average banking size and the multiple banking relationship phenomenon are statistically significant factors affecting credit rationing, presumably through their impact on the aforementioned banks' capability and incentives. Other potential determinants of banks' incentives to monitor and screen, such as local banking competition and firm' capacity to collateralize, are never significant. However, when we split the sample according to the level of competition in credit markets, we find that the estimated marginal effects of all significant determinants of interest are larger in absolute value than those obtained when using the whole sample.     

The relevance of currency risk in the EMU

We investigate how the elimination of intra-European exchange risk may affect international financial markets using a conditional version of the International CAPM. We estimate the EMU and non-EMU components of aggregate currency risk and document significant exposures to both. The premium for EMU risk is positive and associated with exposure to the French, Italian and Spanish currencies. The premium for non-EMU risk is consistently negative and accounts for most of the aggregate currency premiums. In the 1990s, exposures to EMU risk declined significantly while exposures to non-EMU risk increased. Hence the adoption of the Euro is unlikely to have a large impact on aggregate currency risk premiums.     

A de Finetti-Kolmogoroff-Nagumo type integral representation theorem for generalized means on masses

We point out that the Consistency, Continuity and Associativity properties of an extended realvalued functionalm on masses are the basic notions to get a de Finetti-Kolmogoroff-Nagumo type integral representation ofm.

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Riassunto Come è noto il teorema di de Finetti-Kolmogoroff-Nagumo formisce una rappresentazione integrale di particolari funzionali reali, detti medie, definiti per funzioni di ripartizione che distribuiscono l'intera massa su un prefissato intervallo chiuso e limitato dell'asse reale.Nel lavoro [2] gli autori hanno esteso la nozionc di media, considerata ancora come funzionale reale, dalle funzioni di ripartizione alle masse (misure finitamente additive limitate e non negative). In questo modo, estendendo ad essa le usuali proprictà (internalità, associatività, etc.), sono riusciti a provare un teorema di rappresentazione integrale analogo a quello di de Finctti-Kolmogoroff-Nagumo per medie continue ed associative definite su opportuni insiemi di masse tight (cio prive di masse aderenti a – e+).In questo lavoro, naturale prosccuzione del preccedente, si prendono invecc in considerazione medic generalizzate (cioè medie che possono assumere valori reali oppure anche i valori – c+) e masse non neccssariamente tight. Si fa allora vedere che le nozioni di consistenza, continuità e associatività per un funzionale a valori nella retta compatta e definito sulle masse non nulle, sono condizioni caratteristiche per ottencre una sua rappresentazione integrale del tipo de Finctti-Kolmogoroff-Nagumo. Si prova inoltre che, a differenza della media ariumetica, le medic generalizzate continue ed associative possono assumere valori non reali solamente su opportune masse non tight.

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Work performed under the auspices of the National Group for Sthocastic Models and Mathematical Statistics (M.R.S.T. 40%) and G.N.A.F.A. of C.N.R.     

Playing the synthesizer with Canadian data: Adding polls to a structural forecasting model

Election forecasting has become a fixture of election campaigns in a number of democracies. Structural modeling, the major approach to forecasting election results, relies on ‘fundamental’ economic and political variables to predict the incumbent’s vote share usually a few months in advance. Some political scientists contend that adding vote intention polls to these models—i.e., synthesizing ‘fundamental’ variables and polling information—can lead to important accuracy gains. In this paper, we look at the efficiency of different model specifications in predicting the Canadian federal elections from 1953 to 2015. We find that vote intention polls only allow modest accuracy gains late in the campaign. With this backdrop in mind, we then use different model specifications to make ex ante forecasts of the 2019 federal election. Our findings have a number of important implications for the forecasting discipline in Canada as they address the benefits of combining polls and ‘fundamental’ variables to predict election results; the efficiency of varying lag structures; and the issue of translating votes into seats.     

Forecasting recovery rates on non-performing loans with machine learning

We compare the performance of a wide set of regression techniques and machine-learning algorithms for predicting recovery rates on non-performing loans, using a private database from a European debt collection agency. We find that rule-based algorithms such as Cubist, boosted trees, and random forests perform significantly better than other approaches. In addition to loan contract specificities, predictors that refer to the bank recovery process — prior to the portfolio’s sale to a debt collector — are also shown to enhance forecasting performance. These variables, derived from the time series of contacts to defaulted clients and client reimbursements to the bank, help all algorithms better identify debtors with different repayment ability and/or commitment, and in general those with different recovery potential.     

Adaptability, productivity, and educational incentives in a matching model

We study the connections between the labour market and the education sector in a matching framework with ex-post wage bargaining. Workers have multidimensional skills and the search market is segmented by technology. Education is a time-consuming activity and determines jointly the scope - or adaptability - and intensity - or productivity - of individual skills. We establish three main results. First, unemployment provides incentives to schooling by raising the need for adaptability. Second, private returns to productivity are below social returns, but no hold-up phenomenon is involved. Third, due to wage and congestion externalities, private returns to adaptability exceed social returns. As a consequence, both over- and under-education may take place in equilibrium.