Informality and Long‐Run Growth

One of the most salient features of developing economies is the existence of a large informal sector. In this paper, we use quantitative theory to study the dynamic implications of informality on wage inequality, human capital accumulation, child labor, and long‐run growth. Our model can generate transitory informality equilibria or informality‐induced poverty traps. Its calibration reveals that the case for the poverty‐trap hypothesis arises: although informality serves to protect low‐skilled workers from extreme poverty in the short run, it prevents income convergence between developed and developing nations in the long run. Then we examine the effectiveness of different development policies to exit the poverty trap. Our numerical experiments show that using means‐tested education subsidies is the most cost‐effective single policy option. However, for longer time horizons, or as the economy gets closer to the poverty trap threshold, combining means‐tested education and wage subsidies is even more effective.     

Educational inequalities between children of marriage migrants and those of local-born parents – quantile regression results from Taiwan

ABSTRACT

This article studies educational inequalities between children of marriage migrants and those of local-born parents using student test scores from Taiwan. We first find an average raw score gap of 9.5% for children of foreign parents. We then employ quantile regression methodology and find that, after introducing our extensive list of covariates, score gaps vanish for children with a mother from mainland China in all quantiles and for children with a Southeast Asian mother in the highest quantiles. In contrast, we identify large residual score gaps for children with a parent from a culturally more distant country in all quantiles. Different from previous studies which found the largest impact for language usage and parent education, we find that the physical home environment has the highest explanatory power in our analysis.     

Priors and Posterior Computation in Linear Endogenous Variable Models with Imperfect Instruments

In this paper we, like several studies in the recent literature, employ a Bayesian approach to estimation and inference in models with endogeneity concerns by imposing weaker prior assumptions than complete excludability. When allowing for instrument imperfection of this type, the model is only partially identified, and as a consequence standard estimates obtained from the Gibbs simulations can be unacceptably imprecise. We thus describe a substantially improved ‘semi‐analytic’ method for calculating parameter marginal posteriors of interest that only require use of the well‐mixing simulations associated with the identifiable model parameters and the form of the conditional prior. Our methods are also applied in an illustrative application involving the impact of body mass index on earnings. Copyright © 2014 John Wiley & Sons, Ltd.     

Franck Jovanovic and Christophe Schinckus: Econophysics and financial economics: an emerging dialogue

Journal of Economic Interaction and Coordination -     

Modelling momentum winner/loser asymmetry: the sources of winner and loser returns in the ASX200 and S&P500

There is an established body of work showing that the sources of momentum returns change over time. This paper finds that there is also winner/loser asymmetry – that the sources of the winner and loser components of momentum returns differ from each other at the same point in time. Together, these results raise concerns about the prospect of finding a single cause for momentum profits, as most efforts to date have tried to do. Rather, they indicate that investigation should proceed using time‐varying, nonparametric and ensemble techniques.     

Focusing on others before you shop: exposure to Facebook promotes conventional product configurations

Journal of the Academy of Marketing Science - Consumers’ use of social media websites can serve fundamentally different motives, from merely sharing entertaining content, filling up spare...     

Structure of teams—A cooperative game theory approach

One key task for HR departments and managers is to design the structure of teams in the firm. Two main dimensions when carrying out this decision are the size of the teams and the combination of specialized expertise within the team. In this article, we apply cooperative game theory to model this decision. First, we introduce production games. These games are an enhancement of team games and allow the modeling of teams. Together with the coalition structure approach of cooperative game theory, we analyze two standard situations of team theory.     

EU Anti‐dumping and Tariff Cuts: Trade Policy Substitution?

The world trading system in its current form aims at reducing multilateral trade barriers across the board. Indeed, the last successfully concluded multilateral trade negotiations led to substantial tariff concessions on the part of most developed economies. What, however, happened to other forms of import protection? Have substantial tariff concessions subsequently been replaced by the use of alternative forms of import protection? In this paper we empirically investigate the relationship between negotiated external tariff cuts and the subsequent use of anti‐dumping actions by the EU. Evidence is found for larger Uruguay Round tariff cuts increasing the probability of subsequent anti‐dumping investigations.     

Selling prices and profits: what survey data tell about firms’ rationality

This paper states that the strong biases found in survey expectations do not necessarily distort economic decisions. An econometric analysis of price and profit data suggests that Swiss manufacturers do not base their production decisions on the forecasts they supply to the surveying institution. Instead, production decisions are based on data of past prices. This suggests that in their production management, firms make adjustments for biased marketing projections of selling prices. However, the practice of these adjustments is not optimal since it neglects the valuable information contained in these price forecasts. Copyright © 1999 John Wiley & Sons, Ltd.