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Articles 301 - 330 of 2768
Full-Text Articles in Social and Behavioral Sciences
Global Unanimity Equilibrium On The Carbon Budget, Humberto Llavador, John E. Roemer
Global Unanimity Equilibrium On The Carbon Budget, Humberto Llavador, John E. Roemer
Cowles Foundation Discussion Papers
Carbon budgets are a useful way to frame the climate mitigation challenge and much easier to agree upon than the allocation of emissions. We propose a mechanism with countries agreeing on the global carbon budget, while the decision to emit is decentralized at the country level. The revenue is collected in a global fund and allocated according to endogenously defined weights proportional to the marginal cost of climate change. The proposal features a unanimous agreement of the national citizenries of the world and global Pareto efficiency. We run a simulation in the spirit of the Paris Agreement, with zero emissions …
The Economics Of Social Data: An Introduction, Dirk Bergemann, Alessandro Bonatti
The Economics Of Social Data: An Introduction, Dirk Bergemann, Alessandro Bonatti
Cowles Foundation Discussion Papers
Large internet platforms collect data from individual users in almost every interaction on the internet. Whenever an individual browses a news website, searches for a medical term or for a travel recommendation, or simply checks the weather forecast on an app, that individual generates data. A central feature of the data collected from the individuals is its social aspect. Namely, the data captured from an individual user is not only informative about this specific individual, but also about users in some metric similar to the individual. Thus, the individual data is really social data. The social nature of the data …
Breaking Ties: Regression Discontinuity Design Meets Market Design, Atila Abdulkadiro?Lu, Joshua D. Angrist, Yusuke Narita, Parag A. Pathak
Breaking Ties: Regression Discontinuity Design Meets Market Design, Atila Abdulkadiro?Lu, Joshua D. Angrist, Yusuke Narita, Parag A. Pathak
Cowles Foundation Discussion Papers
Centralized school assignment algorithms must distinguish between applicants with the same preferences and priorities. This is done with randomly assigned lottery numbers, nonlottery tie-breakers like test scores, or both. The New York City public high school match illustrates the latter, using test scores, grades, and interviews to rank applicants to screened schools, combined with lottery tie-breaking at unscreened schools. We show how to identify causal effects of school attendance in such settings. Our approach generalizes regression discontinuity designs to allow for multiple treatments and multiple running variables, some of which are randomly assigned. Lotteries generate assignment risk at screened as …
Variable Mismeasurement In A Class Of Dsge Models: Comment, Ray C. Fair
Variable Mismeasurement In A Class Of Dsge Models: Comment, Ray C. Fair
Cowles Foundation Discussion Papers
This comment points out mismeasurement of variables in the DSGE model in Smets and Wouters (2007) and in models that follow the Smets-Wouters measurement procedures. The mismeasurement errors appear to be large.
Global Collateral And Capital Flows, Ana Fostel, John Geanakoplos, Gregory Phelan
Global Collateral And Capital Flows, Ana Fostel, John Geanakoplos, Gregory Phelan
Cowles Foundation Discussion Papers
Cross-border financial flows arise when (otherwise identical) countries differ in their abilities to use assets as collateral to back financial contracts. Financially integrated countries have access to the same set of financial instruments, and yet there is no price convergence of assets with identical payoffs, due to a gap in collateral values. Home (financially advanced) runs a current account deficit. Financial flows amplify asset price volatility in both countries, and gross flows driven by collateral differences collapse following bad news about fundamentals. Our results can explain financial flows among rich, similarly-developed countries, and why these flows increase volatility.
Variable Mismeasurement In A Class Of Dsge Models: Comment, Ray C. Fair
Variable Mismeasurement In A Class Of Dsge Models: Comment, Ray C. Fair
Cowles Foundation Discussion Papers
This comment points out mismeasurement of three of the variables in the DSGE model in Smets and Wouters (2007) and in models that use the Smets-Wouters model as a benchmark. The mismeasurement appears serious enough to call into question the reliability of empirical results using these variables.
Inflation In The Great Recession And New Keynesian Models: Comment, Ray C. Fair
Inflation In The Great Recession And New Keynesian Models: Comment, Ray C. Fair
Cowles Foundation Discussion Papers
This comment points out mismeasurement of three of the variables in the DSGE model in Del Negro, Giannoni, and Schorfheide (2015). These errors began with the model in Smets and Wouters (2007), and they also exist in other models that use the Smets-Wouters model as a benchmark. The mismeasurement appears serious enough to call into question the reliability of empirical results using these variables.
Physical Laws And Human Behavior: A Three-Tier Framework, Shabnam Mousavi, Shyam Sunder
Physical Laws And Human Behavior: A Three-Tier Framework, Shabnam Mousavi, Shyam Sunder
Cowles Foundation Discussion Papers
Social sciences start by looking at the social-psychological attributes of humans to model and explain their observed behavior. However, we suggest starting the study of observed human behavior with the universal laws of physics, e.g., the principle of minimum action. In our proposed three-tier framework, behavior is a manifestation of action driven by physical, biological, and social-psychological principles at the core, intermediate, and top tier, respectively. More broadly, this reordering is an initial step towards building a platform for reorganizing the research methods used for theorizing and modeling behavior. This perspective outlines and illustrates how a physical law can account …
Contract Enforcement And Productive Efficiency: Evidence From The Bidding And Renegotiation Of Power Contracts In India, Nicholas Ryan
Contract Enforcement And Productive Efficiency: Evidence From The Bidding And Renegotiation Of Power Contracts In India, Nicholas Ryan
Cowles Foundation Discussion Papers
Weak contract enforcement may reduce the efficiency of production in developing countries. I study how contract enforcement affects efficiency in procurement auctions for the largest power projects in India. I gather data on bidding and ex post contract renegotiation and find that the renegotiation of contracts in response to cost shocks is widespread, despite that bidders are allowed to index their bids to future costs like the price of coal. Connected firms choose to index less of the value of their bids to coal prices and, through this strategy, expose themselves to cost shocks to induce renegotiation. I use a …
Narratives About Technology-Induced Job Degradation Then And Now, Robert J. Shiller
Narratives About Technology-Induced Job Degradation Then And Now, Robert J. Shiller
Cowles Foundation Discussion Papers
Concerns that technological progress degrades job opportunities have been expressed over much of the last two centuries by both professional economists and the general public. These concerns can be seen in narratives both in scholarly publications and in the news media. Part of the expressed concern about jobs has been about the potential for increased economic inequality. But another part of the concern has been about a perceived decline in job quality in terms of its effects on monotony vs creativity of work, individual sense of identity, power to act independently, and meaning of life. Public policy should take account …
Non-Exclusive Insurance With Free Entry: A Pedagogical Note, Pradeep Dubey, John Geanakoplos
Non-Exclusive Insurance With Free Entry: A Pedagogical Note, Pradeep Dubey, John Geanakoplos
Cowles Foundation Discussion Papers
We consider the Rothschild-Stiglitz model of insurance but without the exclusivity constraint. It turns out that there always exists a unique equilibrium, in which the reliable and unreliable consumers take out a primary insurance up to its quantity limit, and the unreliable take out further secondary insurance at a higher premium. We provide a simple proof of this result (extended to multiple types of consumers) with the hope that it may be pedagogically useful.
Some Important Macro Points, Ray C. Fair
Some Important Macro Points, Ray C. Fair
Cowles Foundation Discussion Papers
This paper lists 19 points that follow from results I have obtained using a structural macroeconomic model (SEM). Such models are more closely tied to the aggregate data than are DSGE models, and I argue that DSGE models and similar models should have properties that are consistent with these points. The aim is to try to bring macro back to its empirical roots.
Some Important Macro Points, Ray C. Fair
Some Important Macro Points, Ray C. Fair
Cowles Foundation Discussion Papers
This paper lists 19 points that follow from results I have obtained using a structural macroeconomic model (SEM). Such models are more closely tied to the aggregate data than are DSGE models, and I argue that DSGE models and similar models should have properties that are consistent with these points. The aim is to try to bring macro back to its empirical roots.
Contract Enforcement And Productive Efficiency: Evidence From The Bidding And Renegotiation Of Power Contracts In India, Nicholas Ryan
Contract Enforcement And Productive Efficiency: Evidence From The Bidding And Renegotiation Of Power Contracts In India, Nicholas Ryan
Cowles Foundation Discussion Papers
Weak contract enforcement may reduce the efficiency of investment in developing countries. I study how contract enforcement affects efficiency in procurement auctions for the largest power projects in India. I gather data on bidding and ex post contract renegotiation and find that the renegotiation of contracts in response to cost shocks is widespread, despite that bidders are allowed to index their bids to future costs like the price of coal. Connected firms choose to index less of the value of their bids to coal prices and, through this strategy, expose themselves to cost shocks to induce renegotiation. I use a …
Spatial Linkages, Global Shocks, And Local Labor Markets: Theory And Evidence, Rodrigo Adão, Costas Arkolakis, Federico Espósito
Spatial Linkages, Global Shocks, And Local Labor Markets: Theory And Evidence, Rodrigo Adão, Costas Arkolakis, Federico Espósito
Cowles Foundation Discussion Papers
How do shocks to economic fundamentals in the world economy affect local labor markets? In a framework with a flexible structure of spatial linkages, we characterize the model-consistent shock exposure of a local market as the exogenous shift in its production revenues and consumption costs. In general equilibrium, labor outcomes in any market respond directly to the market’s own shock exposure, and indirectly to other markets shocks exposures. We show how spatial linkages control the size and the heterogeneity of these indirect effects. We then develop a new estimation methodology - the Model-implied Optimal IV (MOIV) - that exploits quasi-experimental …
Counterfactuals With Latent Information, Dirk Bergemann, Benjamin Brooks, Stephen Morris
Counterfactuals With Latent Information, Dirk Bergemann, Benjamin Brooks, Stephen Morris
Cowles Foundation Discussion Papers
We describe a methodology for making counterfactual predictions in settings where the information held by strategic agents is unknown. The analyst observes behavior assumed to be rationalized by a Bayesian model, in which agents maximize expected utility, given partial and differential information about payoff-relevant states of the world. A counterfactual prediction is desired about behavior in another strategic setting, under the hypothesis that the distribution of the state and agents’ information about the state are held fixed. When the data and the desired counterfactual prediction pertain to environments with finitely many states, players, and actions, the counterfactual prediction is described …
Counterfactuals With Latent Information, Dirk Bergemann, Benjamin Brooks, Stephen Morris
Counterfactuals With Latent Information, Dirk Bergemann, Benjamin Brooks, Stephen Morris
Cowles Foundation Discussion Papers
We describe a methodology for making counterfactual predictions when the information held by strategic agents is a latent parameter. The analyst observes behavior which is rationalized by a Bayesian model, in which agents maximize expected utility, given partial and differential information about payoff-relevant states of the world, represented as an information structure. A counterfactual prediction is desired about behavior in another strategic setting, under the hypothesis that the distribution of the state and agents’ information about the state are held fixed. When the data and the desired counterfactual prediction pertain to environments with finitely many states, players, and actions, there …
Counterfactuals With Latent Information, Dirk Bergemann, Benjamin Brooks, Stephen Morris
Counterfactuals With Latent Information, Dirk Bergemann, Benjamin Brooks, Stephen Morris
Cowles Foundation Discussion Papers
We describe a methodology for making counterfactual predictions in settings where the information held by strategic agents and the distribution of payoff-relevant states of the world are unknown. The analyst observes behavior assumed to be rationalized by a Bayesian model, in which agents maximize expected utility, given partial and differential information about the state. A counterfactual prediction is desired about behavior in another strategic setting, under the hypothesis that the distribution of the state and agents’ information about the state are held fixed. When the data and the desired counterfactual prediction pertain to environments with finitely many states, players, and …
Learning Under Diverse World Views: Model-Based Inference, George J. Mailath, Larry Samuelson
Learning Under Diverse World Views: Model-Based Inference, George J. Mailath, Larry Samuelson
Cowles Foundation Discussion Papers
People reason about uncertainty with deliberately incomplete models, including only the most relevant variables. How do people hampered by different, incomplete views of the world learn from each other? We introduce a model of “model-based inference.” Model-based reasoners partition an otherwise hopelessly complex state space into a manageable model. We nd that unless the differences in agents’ models are trivial, interactions will often not lead agents to have common beliefs, and indeed the correct-model belief will typically lie outside the convex hull of the agents’ beliefs. However, if the agents’ models have enough in common, then interacting will lead agents …
Counterfactuals With Latent Information, Dirk Bergemann, Benjamin Brooks, Stephen Morris
Counterfactuals With Latent Information, Dirk Bergemann, Benjamin Brooks, Stephen Morris
Cowles Foundation Discussion Papers
We describe a methodology for making counterfactual predictions when the information held by strategic agents is a latent parameter. The analyst observes behavior which is rationalized by a Bayesian model in which agents maximize expected utility given partial and differential information about payoff-relevant states of the world. A counterfactual prediction is desired about behavior in another strategic setting, under the hypothesis that the distribution of and agents’ information about the state are held fixed. When the data and the desired counterfactual prediction pertain to environments with finitely many states, players, and actions, there is a finite dimensional description of the …
The Wisdom Of A Confused Crowd: Model-Based Inference, George J. Mailath, Larry Samuelson
The Wisdom Of A Confused Crowd: Model-Based Inference, George J. Mailath, Larry Samuelson
Cowles Foundation Discussion Papers
“Crowds” are often regarded as “wiser” than individuals, and prediction markets are often regarded as effective methods for harnessing this wisdom. If the agents in prediction markets are Bayesians who share a common model and prior belief, then the no-trade theorem implies that we should see no trade in the market. But if the agents in the market are not Bayesians who share a common model and prior belief, then it is no longer obvious that the market outcome aggregates or conveys information. In this paper, we examine a stylized prediction market comprised of Bayesian agents whose inferences are based …
Misinterpreting Others And The Fragility Of Social Learning, Mira Frick, Ryota Iijima, Yuhta Ishii
Misinterpreting Others And The Fragility Of Social Learning, Mira Frick, Ryota Iijima, Yuhta Ishii
Cowles Foundation Discussion Papers
We study to what extent information aggregation in social learning environments is robust to slight misperceptions of others’ characteristics (e.g., tastes or risk attitudes). We consider a population of agents who obtain information about the state of the world both from initial private signals and by observing a random sample of other agents’ actions over time, where agents’ actions depend not only on their beliefs about the state but also on their idiosyncratic types. When agents are correct about the type distribution in the population, they learn the true state in the long run. By contrast, our first main result …
Endogenous Beliefs And Institutional Structure In Competitive Equilibrium With Adverse Selection, Gerald David Jaynes
Endogenous Beliefs And Institutional Structure In Competitive Equilibrium With Adverse Selection, Gerald David Jaynes
Cowles Foundation Discussion Papers
I model financial markets that structure decision-making into discrete points separating contract offers, applications, and acceptance/denial decisions. Endogenous beliefs about applicants’ risk types emerge as the institutional process extracts private information allowing uninformed firms to infer risk qualities by comparing applications of many consumers. Endogenous beliefs and low-risk consumer behavior render truthful disclosure of transactions incentive compatible supporting a unique equilibrium robust to cream-skimming and cross-subsidizing deviations, even under Hellwig’s “secret” policy assumption. In equilibrium each type demands low-risk’s optimal pooling policy and high-risk supplement to full coverage at fair-price. Nonpassive consumers’ belief firms are sequentially rational necessary for equilibrium; …
Misinterpreting Others And The Fragility Of Social Learning, Mira Frick, Ryota Iijima, Yuhta Ishii
Misinterpreting Others And The Fragility Of Social Learning, Mira Frick, Ryota Iijima, Yuhta Ishii
Cowles Foundation Discussion Papers
We exhibit a natural environment, social learning among heterogeneous agents, where even slight misperceptions can have a large negative impact on long-run learning outcomes. We consider a population of agents who obtain information about the state of the world both from initial private signals and by observing a random sample of other agents’ actions over time, where agents’ actions depend not only on their beliefs about the state but also on their idiosyncratic types (e.g., tastes or risk attitudes). When agents are correct about the type distribution in the population, they learn the true state in the long run. By …
Eliminating Latent Discrimination: Train Then Mask, Soheil Ghili, Ehsan Kazemi, Amin Karbasi
Eliminating Latent Discrimination: Train Then Mask, Soheil Ghili, Ehsan Kazemi, Amin Karbasi
Cowles Foundation Discussion Papers
How can we control for latent discrimination in predictive models? How can we provably remove it? Such questions are at the heart of algorithmic fairness and its impacts on society. In this paper, we define a new operational fairness criteria, inspired by the well-understood notion of omitted variable-bias in statistics and econometrics. Our notion of fairness effectively controls for sensitive features and provides diagnostics for deviations from fair decision making. We then establish analytical and algorithmic results about the existence of a fair classifier in the context of supervised learning. Our results readily imply a simple, but rather counter-intuitive, strategy …
Counterfactuals With Latent Information, Dirk Bergemann, Benjamin Brooks, Stephen Morris
Counterfactuals With Latent Information, Dirk Bergemann, Benjamin Brooks, Stephen Morris
Cowles Foundation Discussion Papers
We describe a methodology for making counterfactual predictions when the information held by strategic agents is a latent parameter. The analyst observes behavior which is rationalized by a Bayesian model in which agents maximize expected utility, given partial and differential information about payoff-relevant states of the world. A counterfactual prediction is desired about behavior in another strategic setting, under the hypothesis that the distribution of and agents’ information about the state are held fixed. When the data and the desired counterfactual prediction pertain to environments with finitely many states, players, and actions, there is a finite dimensional description of the …
Aiming For The Goal: Contribution Dynamics Of Crowdfunding, Joyee Deb, Aniko Öry (Oery), Kevin R. Williams
Aiming For The Goal: Contribution Dynamics Of Crowdfunding, Joyee Deb, Aniko Öry (Oery), Kevin R. Williams
Cowles Foundation Discussion Papers
Fundraising campaigns draw support from a wide pool of contributors. Some contributors are interested in private rewards offered in exchange for contributions (buyers), whereas others are publicly-minded and value success (donors). Buyers face a coordination problem because of the positive externalities of campaign success. A leadership donor who strategically times contributions can promote coordination by dynamically signaling his valuation. The ability to signal increases the probability of success and benefits all participants relative to the donor valuation being known. We validate our modeling assumptions and theoretical predictions using Kickstarter data.
Efficient Counterfactual Learning From Bandit Feedback, Yusuke Narita, Shota Yasui, Kohei Yata
Efficient Counterfactual Learning From Bandit Feedback, Yusuke Narita, Shota Yasui, Kohei Yata
Cowles Foundation Discussion Papers
What is the most statistically efficient way to do off-policy optimization with batch data from bandit feedback? For log data generated by contextual bandit algorithms, we consider offline estimators for the expected reward from a counterfactual policy. Our estimators are shown to have lowest variance in a wide class of estimators, achieving variance reduction relative to standard estimators. We then apply our estimators to improve advertisement design by a major advertisement company. Consistent with the theoretical result, our estimators allow us to improve on the existing bandit algorithm with more statistical confidence compared to a state-of-theart benchmark.
Har Testing For Spurious Regression In Trend, Peter C.B. Phillips, Yonghui Zhang, Xiaohu Wang
Har Testing For Spurious Regression In Trend, Peter C.B. Phillips, Yonghui Zhang, Xiaohu Wang
Cowles Foundation Discussion Papers
The usual t test, the t test based on heteroskedasticity and autocorrelation consistent (HAC) covariance matrix estimators, and the heteroskedasticity and autocorrelation robust (HAR) test are three statistics that are widely used in applied econometric work. The use of these significance tests in trend regression is of particular interest given the potential for spurious relationships in trend formulations. Following a longstanding tradition in the spurious regression literature, this paper investigates the asymptotic and finite sample properties of these test statistics in several spurious regression contexts, including regression of stochastic trends on time polynomials and regressions among independent random walks. Concordant …
Dynamic Panel Modeling Of Climate Change, Peter C.B. Phillips
Dynamic Panel Modeling Of Climate Change, Peter C.B. Phillips
Cowles Foundation Discussion Papers
We discuss some conceptual and practical issues that arise from the presence of global energy balance effects on station level adjustment mechanisms in dynamic panel regressions with climate data. The paper provides asymptotic analyses, observational data computations, and Monte Carlo simulations to assess the use of various estimation methodologies, including standard dynamic panel regression and cointegration techniques that have been used in earlier research. The findings reveal massive bias in system GMM estimation of the dynamic panel regression parameters, which arise from fixed effect heterogeneity across individual station level observations. Difference GMM and Within Group (WG) estimation have little bias …