How do successful scholars get their best research ideas? An exploration

We interview 24 marketing professors to ask how they got the ideas for 64 of their papers. More than three-quarters of the papers were inspired by holes in the literature, by a “stylized fact” that the current literature cannot explain, or by an interaction with a manager. The rest fall into several smaller categories that to a large extent can be seen as special cases of the three big ones. We describe how papers from each of the three big categories help move the literature forward. We also illustrate the range of situations contained in each category by way of several examples. Among the authors we interview, most do not use a single source. As these authors become more senior, managerial contacts play an increasing role, while the balance between literature and stylized facts appears to be unchanged.

     

Two‐sample nonparametric estimation of intergenerational income mobility in the United States and Sweden

We estimate intergenerational income mobility in the US and Sweden, using a new nonparametric approach. The approach addresses several empirical issues raised in the literature and applies when other estimators are infeasible. We argue that previous estimates of income mobility conceal the heterogeneous nature of the transmission mechanism by keeping mobility constant across families. The striking differences we find between mobility patterns across family backgrounds, captured by father's education, lead us to question the conventional result that intergenerational transmission of earnings is weaker in Sweden than in the United States, for important parts of the population.     

Beyond Tax Avoidance: Offshore Firms’ Institutional Environment and Financial Reporting Quality*

We explore how firms’ operations in Offshore Financial Centers (OFCs) through subsidiaries or affiliates affect the quality of financial reporting. Using a unique and large sample of firms that have headquarters in the 15 countries with the strictest legal regimes and have subsidiaries or affiliates in OFCs, we find that such firms exhibit lower financial reporting quality than comparable firms without OFC operations. We also find that as OFC characteristics become more prevalent, firms are more likely to engage in both accrual‐based and real earnings management. More importantly, after disentangling OFC characteristics into the opportunity for tax avoidance, regulation arbitrage and secrecy policies, we find that beyond tax avoidance, regulation arbitrage and the secrecy policies of OFCs significantly affect financial reporting quality. The causal effect of OFC operations is supported by the analysis of financial reporting quality when firms set up OFC operations. Our findings are robust to various additional tests addressing potential endogeneity issues. We conclude that the assessment of a firm's institutional environment must encompass the registration status of its subsidiaries or affiliates as well as its own.     

The evolution of financial constraints

We demonstrate that the severity of financial constraints has declined over time for two reasons: (i) improved access to external funds as evidenced by a decreased reliance on internal cash flows, and (ii) an inward shifting investment frontier with reduced investment opportunities. The decline in financial constraints coincides with the documented diminishing sensitivity of investment to cash flows, yet we show that cash flows remain a determining factor in helping constrained firms overcome restricted access to external capital. There is a flight-to-quality during economic shocks, where the adverse effects following periods of tightened credit are particularly pronounced for smaller firms, with larger firms appearing largely unaffected.     

An algorithm for constructing high dimensional distributions from distributions of lower dimension

We propose a new sequential procedure for estimating multivariate distributions in cases when conventional maximum likelihood has too many parameters and is therefore inaccurate or non-operational. The procedure constructs a multivariate distribution and its pseudo-likelihood sequentially, in each step using lower-dimensional distributions with a small number of parameters. In an application, the procedure provides excellent fit when the dimension is moderate, and remains operational when the conventional method fails.     

Likelihood-based estimation in a panel setting: Robustness,redundancy and validity of copulas

This paper considers the estimation of likelihood-based models in a panel setting. That is, we have panel data, and for each time period separately we have a correctly specified model that could be estimated by MLE. We want to allow non-independence over time. This paper shows how to improve on the QMLE. It then considers MLE based on joint distributions constructed using copulas. It discusses the efficiency gain from using the true copula, and shows that knowledge of the true copula is redundant only if the variance matrix of the relevant set of moment conditions is singular. It also discusses the question of robustness against misspecification of the copula, and proposes a test of the validity of the copula. GMM methods are argued to be useful analytically, and also for reasons of efficiency if the copula is robust but not correct.     

GMM redundancy results for general missing data problems

We consider questions of efficiency and redundancy in the GMM estimation problem in which we have two sets of moment conditions, where two sets of parameters enter into one set of moment conditions, while only one set of parameters enters into the other. We then apply these results to a selectivity problem in which the first set of moment conditions is for the model of interest, and the second set of moment conditions is for the selection process. We use these results to explain the counterintuitive result in the literature that, under an ignorability assumption that justifies GMM with weighted moment conditions, weighting using estimated probabilities of selection is better than weighting using the true probabilities. We also consider estimation under an exogeneity of selection assumption such that both the unweighted and the weighted moment conditions are valid, and we show that when weighting is not needed for consistency, it is also not useful for efficiency.     

A Simple Estimator of Two-Dimensional Copulas,with Applications1

Copulas are distributions with uniform marginals. Non-parametric copula estimates may violate the uniformity condition in finite samples. We look at whether it is possible to obtain valid piecewise linear copula densities by triangulation. The copula property imposes strict constraints on design points, making an equi-spaced grid a natural starting point. However, the mixed-integer nature of the problem makes a pure triangulation approach impractical on fine grids. As an alternative, we study the ways of approximating copula densities with triangular functions which guarantees that the estimator is a valid copula density. The family of resulting estimators can be viewed as a non-parametric MLE of B-spline coefficients on possibly non-equally spaced grids under simple linear constraints. As such, it can be easily solved using standard convex optimization tools and allows for a degree of localization. A simulation study shows an attractive performance of the estimator in small samples and compares it with some of the leading alternatives. We demonstrate empirical relevance of our approach using three applications. In the first application, we investigate how the body mass index of children depends on that of parents. In the second application, we construct a bivariate copula underlying the Gibson paradox from macroeconomics. In the third application, we show the benefit of using our approach in testing the null of independence against the alternative of an arbitrary dependence pattern.     

A new family of copulas,with application to estimation of a production frontier system

Journal of Productivity Analysis - In the empirical literature, the analysis of aggregate productivity dynamics using firm-level productivity has mostly been based on changes in the mean of...