A Cautionary Tale About Control Variables in IV Estimation

Many instrumental variable (IV) regressions include control variables to justify (conditional) independence of the instrument and the potential outcomes. The plausibility of conditional IV independence crucially depends on the timing when the control variables are determined. This paper works through different IV models and discusses the (conditions for the) satisfaction of conditional IV independence depending on whether the control variables are measured prior to or after instrument assignment. To illustrate the identification issues, we consider the Vietnam War draft risk as instrument either for veteran status or education to evaluate the effects of these variables on labour market and health outcomes. Our empirical analysis based on the ‘Young Men in High School and Beyond’ survey suggests that commonly used conditional IV strategies to estimate the impact of draft induced military service or education may be severely biased due to the use of improper controls.     

The term structure of cross-sectional dispersion of expectations in a Learning-to-Forecast Experiment

In this paper, we present the results of a Learning-to-Forecast Experiment (LtFE) where we eliciting short- as well as long-run expectations regarding the future price dynamics in markets with positive and negative expectations feedback. Comparing our results on short-run expectations with the LtFE literature, we prove that eliciting long-run expectations has no impact on the price dynamics nor on short-run expectations formation. In particular, we confirm that the Rational Expectation Equilibrium (REE) is a good benchmark only for the markets with negative feedback. Interestingly, our data show that while the term structure of the cross-sectional dispersion of expectations is convex in positive feedback markets, it is concave in negative feedback markets. Differences in the slope of the term structure stem from diverse degrees of uncertainty regarding the evolution of prices in the two feedback systems: (1) in the negative feedback system, the convergence of the price to the REE reflects a tendency for coordination of long-run expectations around the fundamental value; (2) conversely, oscillatory price dynamics observed in the positive feedback system is responsible for the diverging pattern of long-run expectations. Finally, we propose a new measure of heterogeneity of expectations based on the scaling of the dispersion of expectations over the forecasting horizon.

     

Forecast combination through dimension reduction techniques

This paper considers several methods of producing a single forecast from several individual ones. We compare “standard” but hard to beat combination schemes (such as the average of forecasts at each period, or consensus forecast and OLS-based combination schemes) with more sophisticated alternatives that involve dimension reduction techniques. Specifically, we consider principal components, dynamic factor models, partial least squares and sliced inverse regression.Our source of forecasts is the Survey of Professional Forecasters, which provides forecasts for the main US macroeconomic aggregates. The forecasting results show that partial least squares, principal component regression and factor analysis have similar performances (better than the usual benchmark models), but sliced inverse regression shows an extreme behavior (performs either very well or very poorly).     

Organizational antecedents and competitive consequences of environmental proactivity in the hotel industry

This research simultaneously examines the influence of organizational design variables (specialization, decentralization, formalization, link mechanisms, and informal social relations) on environmental proactivity, and the impact of this environmental proactivity on the competitiveness of hotels. The joint analysis of causes and consequences of environmental proactivity, and the relationship between organizational design and environmental management are topics that have rarely been explored in the literature. Using structural equation modeling methodology, a model is empirically tested using a survey instrument that was distributed to hotels in Spain. The findings indicate that specialization, formalization, link mechanisms, and informal social relations are effective coordination mechanisms to foster environmental proactivity. Moreover, the most effective way of encouraging the implementation of environmental practices is formalization. The findings also show that environmental proactivity contributes to improving competitive advantage in terms of both cost and differentiation.     

Water pricing policies,public decision making and farmers' response: implications for water policy

The problems caused by water scarcity demand important changes in the criteria and objectives of water policies. The agricultural sector in Spain consumes up to 80% of all available hydric resources and the need to increase the efficiency of current uses of water in the agricultural sector is at the core of the country's national water policy. One alternative would be to resort to water pricing policies with the aim of providing incentives to save water consumption although it would inflict a certain degree of income losses to the farmers and raise the revenue collected by the water authorities. The objective of this research is to analyze the effect caused by the application of different water pricing policies on water demand, farmers' income and the revenue collected by the government agency. To undertake this analysis a dynamic mathematical programming model has been built that simulates farmers' behavior and their response to different water pricing scenarios. Empirical application of the model has been carried out in several irrigation districts in Spain covering varied farm regions and river basins. Results show that the effects of alternative pricing policies for irrigation water are strongly dependent on regional, structural and institutional conditions and that changing policies produce distinct consequences within the same region and water district. Thus, equivalent water charges would create widespread effects on water savings, farm income and collected government revenue across regions and districts.     

Endorsing Sustainable Food Consumption: Prospects from Public Catering

The aim of this article was to analyse an attempt to promote sustainable consumption by shaping the conditions for consumption. In particular, the focus lies on sustainable public catering as an approach to shaping both the supply of and demand for sustainable meals. In order to capture the processes of governing consumption, the way is traced in which rationalities (ways of thinking and calculating), technologies (means and instruments), visibilities (concrete manifestations), and identities (types of agents assumed) related to a policy intervention for sustainable public catering are interpreted and recreated by three main groups of actors involved: policy makers, catering professionals, and consumers. This analysis highlights the active role of practitioners in realizing policies for sustainable consumption. It has implications for policy makers and analysts: Reflexive policies should heed to actors’ unfolding interpretations as they can take the policy process in different directions.     

Die aktuelle Weltwirtschaftskrise und der ökologische Umbau der Wirtschaft

Die aktuelle Finanz- und Wirtschaftskrise und der Klimawandel haben gemeinsame Wurzeln, aber ganz unterschiedliche Wirkungen. Sie werden deshalb auch sehr verschieden wahrgenommen. Sie lassen sich nur bek?mpfen, wenn man klug aufeinander abgestimmte politische Ma?nahmen ergreift.     

Effects of Prominence,Involvement, and Persuasion Knowledge on Children's Cognitive and Affective Responses to Advergames

The integrated and highly involving nature of advergames has led to criticism and concern among academics and caretakers. It is assumed that children are highly susceptible to persuasion via advergames, but empirical evidence is scarce. Therefore, this study examined the effects of three factors typically associated with advergames: brand prominence, game involvement, and (limited) persuasion knowledge on cognitive and affective responses. An experiment among 7 to 12 year old children (N = 105) showed that brand prominence and game involvement influenced children's responses, while persuasion knowledge did not. Brand prominence led to increased brand recall and recognition, whereas game involvement led to more positive brand attitudes. The effect of game involvement was mediated by game attitude, indicating that children are susceptible to affective mechanisms induced by the game. Crucially, our results demonstrate that brand prominence evokes cognitive responses, while game involvement leads to affective responses. Finally, our study revealed that persuasion knowledge (i.e. knowledge of the commercial source of the game and its persuasive intent) did not influence cognitive or affective responses to the brand or game. This implies that even if children understand the game's commercial and persuasive nature, they do not use this knowledge as a defense against the advergame's effects. This study has important theoretical and practical implications regarding the influence of new marketing techniques on children.     

Sectoral linkages of foreign direct investment firms to the Czech economy

Foreign direct investments (FDI) influence the industrial structure of the host economy through linkages to the domestic economy. Firms may use intermediate goods produced by either domestic or foreign firms, and sell their products to either domestic or foreign customers. The resulting change in the industrial structure of the indigenous economy is analysed in a panel regression for the case of the Czech Republic. The results show that linkages have a strong influence on the sectoral composition of the indigenous economy, supporting the development of indigenous manufacturing and labour-intensive industry.