Bayesian Model Averaging: A Systematic Review and Conceptual Classification

Bayesian model averaging (BMA) provides a coherent and systematic mechanism for accounting for model uncertainty. It can be regarded as an direct application of Bayesian inference to the problem of model selection, combined estimation and prediction. BMA produces a straightforward model choice criterion and less risky predictions. However, the application of BMA is not always straightforward, leading to diverse assumptions and situational choices on its different aspects. Despite the widespread application of BMA in the literature, there were not many accounts of these differences and trends besides a few landmark revisions in the late 1990s and early 2000s, therefore not accounting for advancements made in the last decades. In this work, we present an account of these developments through a careful content analysis of 820 articles in BMA published between 1996 and 2016. We also develop a conceptual classification scheme to better describe this vast literature, understand its trends and future directions and provide guidance for the researcher interested in both the application and development of the methodology. The results of the classification scheme and content review are then used to discuss the present and future of the BMA literature.     

Cash Transfers to the Poor and the Labor Market: An Equilibrium Analysis

This paper studies the effects of cash transfers to the poor on the labor market. This is investigated in a matching model with endogenous labor market participation and job destruction. Depending on their productivity, workers might want to stay in the job, become unemployed, or leave the labor market; in addition, workers out of the labor force might decide to search for a job. Cash transfers are introduced to all agents with income below a given level. Two qualitative results are found: (i) The size of cash transfers has a negative effect on the employment rate, but an ambiguous effect on the unemployment rate; and (ii) the coverage of this welfare program has a positive effect on the employment rate, and an ambiguous effect on the unemployment rate. The numerical simulations also show that: (i) if the government target is to reduce inequality and poverty, the more efficient policy is to increase the level of benefits instead of increasing the eligibility of the program; (ii) compared with a welfare program that condition eligibility to labor market participation, the “unconditional” cash transfer program has a stronger impact on inequality and poverty, but with a reduction in labor market participation and output.     

The impact on broadband access to the Internet of the dual ownership of telephone and cable networks

In Portugal, until recently, the telecommunications incumbent offered broadband access to the Internet, both through digital subscriber line and cable modem. We estimate the impact on broadband access to the Internet of the structural separation of these two businesses. Using a panel of consumer level data and a random effects mixed logit model, we estimate the price elasticities of demand and the marginal costs of broadband access to the Internet. Based on these estimates, we simulate the effect of structural separation on prices and social welfare. Our estimates indicate that structural separation would cause a substantial welfare increase. These results raise questions about the policy of some countries of allowing the dual ownership of telephone and cable networks.     

Portugal’s banking and financial crises: unexpected consequences of monetary integration?

Portugal’s current financial crisis might be related to a banking crisis resulting from joining the Euro. The new-currency eliminated the exchange rate risk, but not the credit or liquidity risks within the Euroarea. However, Portuguese banks acted as if all of these risks had disappeared. They began pumping money in Portugal, by borrowing intensively in Euros abroad at low interest rates. The ensuing liquidity generated a capital-flow bonanza boom that culminated in a bust phase. Private and sovereign debt dramatically increased, which further soared when the government rescued banks. Portugal was then compelled to take extreme measures to address extraordinary debt-levels.     

Institutions and economic development: How strong is the relation?

This paper investigates the relationship between institutions and economic development (output per worker). As in Hall and Jones (1999), we find that a 1% improvement in institutions (as we measure them) generates on average a 5% increase in output per worker. However, this relationship is not linear and the data have important heterogeneity. Countries with the same value of institutions have different levels of income per worker. We ask whether the “returns to institutions” are the same across countries conditional on the level of institutions. Using quantile regression methods, we show that for countries at the top of the conditional distribution of international incomes, the “returns to institutions” are lower (around 3.8%,) than for countries at the bottom of this distribution (around 6.2%). We show that this result is robust for different model specifications and definitions of institutions. We also provide evidence that, conditional on the level of institutional development, the distribution of output per worker tends to become less disperse as countries improve their institutional framework. In other words, having better institutions is essential in order to close the output-per-worker gap across countries. Finally, we provide the rationale behind the results through a modified version of a Neoclassical Growth Model with time varying wedges, representing policy distortions and institutions.We thank Lee Alston, Roger Koenker, and Stephen L. Parente for helpful discussion, Werner Baer for useful comments, and Chad Jones for facilitating access to the data set. We are also indebted to an anonymous referee and an associate editor for important suggestions that improved the final paper. The analysis, opinions and findings expressed herein represent the views of the authors, they are not necessarily those of the Banco de Portugal. Any remaining errors are our responsibility.First version received: May 2001/Final version received: August 2003     

Evaluating the impact of virtualization characteristics on SaaS adoption

Software as a service (SaaS) is a service model in which the applications are accessible from various client devices through internet. Several studies report possible factors driving the adoption of SaaS but none have considered the perception of the SaaS features and the organization’s context. We propose an integrated research model that combines the process virtualization theory (PVT), the technology-organization-environment (TOE) framework and the institutional theory (INT). PVT seeks to explain whether processes are suitable for migration into virtual environments via an information technology-based mechanism as SaaS. The TOE framework seeks to explain the effects of the intra-organizational factors, while INT seeks to explain the effects of the inter-organizational factors on the technology adoption. This research addresses a gap in the SaaS adoption literature by studying the internal perception of the technical features of SaaS and technology, organization, and environment perspectives. Additionally, the integration of PVT, the TOE framework, and INT contributes to the information system (IS) discipline, deepening the applicability and strengths of these theories.     

Public Debt,Economic Growth and Inflation in African Economies

We analyse the relationship between public debt, economic growth and inflation in a group of 52 African economies between 1950 and 2012. The results indicate that the limits of public debt are negatively related to economic growth and exhibit, from a given level of debt, an inverted U behaviour regarding the relationship between economic growth and public debt. Briefly, the high levels of public debt are coincident with reduced rates of economic growth and rising levels of inflation. Our results for three specific geographical areas resemble those of the overall analysis, despite some differences. In North African countries, the growth rates of the gross domestic product (GDP) and inflation also show an inverted U behaviour as the ratio of public debt/GDP increases. The highest rate of economic growth is recorded when the ratio of public debt/GDP is below 30% of GDP and corresponds to an average inflation rate of 5.33%. An identical behaviour of the GDP growth rates and inflation also appears in Sub‐Saharan countries until the third interval (60–90%). However, the highest growth rate of the GDP and GDP per capita is registered when the public debt/GDP ratio is in the second interval (30–60%). For the countries of the Southern Africa Development Community, the highest average rate of economic growth (6.8%) is similar to North African countries, when the ratio public debt/GDP is below 30% of GDP, with an average inflation rate of 11%. A number of robustness analyses were performed and the great majority of them confirm the general analysis.     

R&D Subsidies and Foreign Direct Investment

We devise a model in which domestic firms do applied R&D, which can be subsidized by the government, and foreign firms with superior technology can enter in the domestic market. Foreign Direct Investment can act as a substitute of subsidies to improve domestic R&D, the share of domestic leading firms and consumption. Relatively closed economies may benefit from R&D subsidization while relatively open economies may not. For relatively low growth of the technological frontier, it is optimal to subsidize R&D and close the economy to foreign investment but the opposite happens for relatively high growth. Numerical simulations show the economy dynamics after policy experiments.