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Full-Text Articles in Social and Behavioral Sciences
Three Essays On The Theory Of Money And Financial Institutions: Essay 1: A Nontechnical Overview, Martin Shubik
Three Essays On The Theory Of Money And Financial Institutions: Essay 1: A Nontechnical Overview, Martin Shubik
Cowles Foundation Discussion Papers
This is a nontechnical retrospective paper on a game theoretic approach to the theory of money and financial institutions. The stress is on process models and the reconciliation of general equilibrium with Keynes and Schumpeter’s approaches to non-equilibrium dynamics.
Methods For Nonparametric And Semiparametric Regressions With Endogeneity: A Gentle Guide, Xiaohong Chen, Yin Jia Qiu
Methods For Nonparametric And Semiparametric Regressions With Endogeneity: A Gentle Guide, Xiaohong Chen, Yin Jia Qiu
Cowles Foundation Discussion Papers
This paper reviews recent advances in estimation and inference for nonparametric and semiparametric models with endogeneity. It first describes methods of sieves and penalization for estimating unknown functions identified via conditional moment restrictions. Examples include nonparametric instrumental variables regression (NPIV), nonparametric quantile IV regression and many more semi-nonparametric structural models. Asymptotic properties of the sieve estimators and the sieve Wald, quasi-likelihood ratio (QLR) hypothesis tests of functionals with nonparametric endogeneity are presented. For sieve NPIV estimation, the rate-adaptive data-driven choices of sieve regularization parameters and the sieve score bootstrap uniform confidence bands are described. Finally, simple sieve variance estimation and …
Dynamic Equality Of Opportunity, John E. Roemer, Burak Unveren
Dynamic Equality Of Opportunity, John E. Roemer, Burak Unveren
Cowles Foundation Discussion Papers
What are the long-term effects of policies intended to equalize opportunities among different social classes of children? To find out, we study the stationary states of an intergenerational model where adults are either White or Blue collar employees. Both adults and the state invest in their children’s education. Our analysis indicates that the major obstacle to equalizing opportunities in the long-run is private educational investment. Next we examine economies where only the state invests in education, motivated by the Nordic experience. In a majority of these economies, no child lags behind regarding future prospects, a theoretical result confirmed by simulations.
The Optimal Distribution Of Income Revisited, Ray C. Fair
The Optimal Distribution Of Income Revisited, Ray C. Fair
Cowles Foundation Discussion Papers
This paper revisits the optimal distribution of income model in Fair (1971). This model is the same as in Mirrlees (1971) except that education is also a decision variable and tax rates are restricted to lie on a tax function. In the current paper the tax-rate restriction is relaxed. As in Fair (1971), a numerical method is used. The current method uses the DFP algorithm with numeric derivatives. Because no analytic derivatives have to be taken,it is easy to change assumptions and functional forms and run alternative experiments. Gini coefficients are computed, which provides a metric for comparing the redistributive …
Simple Nonparametric Estimators For The Bid-Ask Spread In The Roll Model, Xiaohong Chen, Oliver B. Linton, Stefan Schneeberger
Simple Nonparametric Estimators For The Bid-Ask Spread In The Roll Model, Xiaohong Chen, Oliver B. Linton, Stefan Schneeberger
Cowles Foundation Discussion Papers
We propose new methods for estimating the bid-ask spread from observed transaction prices alone. Our methods are based on the empirical characteristic function instead of the sample autocovariance function like the method of Roll (1984). As in Roll (1984), we have a closed form expression for the spread, but this is only based on a limited amount of the model-implied identification restrictions. We also provide methods that take account of more identification information. We compare our methods theoretically and numerically with the Roll method as well as with its best known competitor, the Hasbrouck (2004) method, which uses a Bayesian …
Popular Attitudes Towards Markets And Democracy: Russia And United States Compared 25 Years Later, Maxim Boycko, Robert J. Shiller
Popular Attitudes Towards Markets And Democracy: Russia And United States Compared 25 Years Later, Maxim Boycko, Robert J. Shiller
Cowles Foundation Discussion Papers
We repeat a survey we did in the waning days of the Soviet Union (Shiller, Boycko and Korobov, AER 1991) comparing attitudes towards free markets between Moscow and New York. Additional survey questions, from Gibson Duch and Tedin (J. Politics 1992) are added to compare attitudes towards democracy. Two comparisons are made: between countries, and through time, to explore the existence of international differences in allegiance to democratic free-market institutions, and the stability of these differences. While we find some differences in attitudes towards markets across countries and through time, we do not find most of the differences large or …
How Fast Do Equilibrium Payoff Sets Converge In Repeated Games?, Johannes Hörner, Satoru Takahashi
How Fast Do Equilibrium Payoff Sets Converge In Repeated Games?, Johannes Hörner, Satoru Takahashi
Cowles Foundation Discussion Papers
We provide tight bounds on the rate of convergence of the equilibrium payoff sets for repeated games under both perfect and imperfect public monitoring. The distance between the equilibrium payoff set and its limit vanishes at rate (1 − δ) 1/2 under perfect monitoring, and at rate (1 − δ) 1/4 under imperfect monitoring. For strictly individually rational payoff vectors, these rates improve to 0 (i.e., all strictly individually rational payoff vectors are exactly achieved as equilibrium payoffs for delta high enough) and (1 − δ) 1/2 , respectively.
Information Design, Bayesian Persuasion And Bayes Correlated Equilibrium, Dirk Bergemann, Stephen Morris
Information Design, Bayesian Persuasion And Bayes Correlated Equilibrium, Dirk Bergemann, Stephen Morris
Cowles Foundation Discussion Papers
A set of players have preferences over a set of outcomes. We consider the problem of an “information designer” who can choose an information structure for the players to serve his ends, but has no ability to change the mechanism (or force the players to make particular action choices). We describe a unifying perspective for information design. We consider a simple example of Bayesian persuasion with both an uninformed and informed receiver. We extend information design to many players and relate it to the literature on incomplete information correlated equilibrium.
The Extensive Margin Of Exporting Products: A Firm-Level Analysis, Costas Arkolakis, Sharat Ganapati, Marc-Andreas Muendler
The Extensive Margin Of Exporting Products: A Firm-Level Analysis, Costas Arkolakis, Sharat Ganapati, Marc-Andreas Muendler
Cowles Foundation Discussion Papers
We examine multi-product exporters and use firm-product-destination data to quantify export entry barriers. Our general-equilibrium model of multi-product firms generalizes earlier models. To match main facts about multi-product exporters, we estimate our model with rich demand and access cost shocks for Brazilian firms. The estimates document that additional products farther from a firm’s core competency incur higher unit costs, but face lower market access costs. We find that these market access costs differ across destinations and evaluate a scenario that standardizes market access between countries. The resulting welfare gains are similar to eliminating all current tariffs.
Human Capital Development And Parental Investment In India, Orazio P. Attanasio, Costas Meghir, Emily Nix
Human Capital Development And Parental Investment In India, Orazio P. Attanasio, Costas Meghir, Emily Nix
Cowles Foundation Discussion Papers
We estimate production functions for cognition and health for children aged 1-12 in India, where over 70 million children aged 0-5 are at risk of developmental deficits. The inputs into the production functions include parental background, prior child cognition and health, and child investments. We use income and local prices to control for the endogeneity of investments. We find that cognition is sensitive to investments throughout the age range we consider, while health is mainly affected by early investments. We also find that inputs are complementary, and crucially that health is very important in determining cognition. Our paper contributes in …
Human Capital Development And Parental Investment In India, Orazio P. Attanasio, Costas Meghir, Emily Nix
Human Capital Development And Parental Investment In India, Orazio P. Attanasio, Costas Meghir, Emily Nix
Cowles Foundation Discussion Papers
We estimate production functions for cognition and health for children aged 1-12 in India, based on the Young Lives Survey. India has over 70 million children aged 0-5 who are at risk of developmental deficits. The inputs into the production functions include parental background, prior child cognition and health, and child investments, which are taken as endogenous. Estimation is based on a nonlinear factor model, based on multiple measurements for both inputs and child outcomes. Our results show an important effect of early health on child cognitive development, which then becomes persistent. Parental investments affect cognitive development at all ages, …
Human Capital Development And Parental Investment In India, Orazio P. Attanasio, Costas Meghir, Emily Nix
Human Capital Development And Parental Investment In India, Orazio P. Attanasio, Costas Meghir, Emily Nix
Cowles Foundation Discussion Papers
In this paper we estimate production functions for cognition and health throughout four stages of childhood from 5-15 years of age using two cohorts of children drawn from the Young Lives Survey for India. The inputs into the production function include parental background, prior child cognition and health and child investments. We allow investments to be endogenous and they depend on local prices and household income, as well as on the exogenous determinants of cognition and health. We find that investments are very important determinants of child cognition and of health at an earlier age. We also find that inputs …
Premuneration Values And Investments In Matching Markets, George J. Mailath, Andrew Postlewaite, Larry Samuelson
Premuneration Values And Investments In Matching Markets, George J. Mailath, Andrew Postlewaite, Larry Samuelson
Cowles Foundation Discussion Papers
We analyze a model in which agents make investments and then match into pairs to create a surplus. The agents can make transfers to reallocate their pretransfer ownership claims on the surplus. Mailath, Postlewaite and Samuelson (2013) showed that when investments are unobservable, equilibrium investments are generally inefficient. In this paper we work with a more structured model that is sufficiently tractable to analyze the nature of the investment inefficiencies. We provide conditions under which investment is inefficiently high or low and conditions under which changes in the pretransfer ownership claims on the surplus will be Pareto improving, as well …
Optimal Product Variety In Radio Markets, Steven T. Berry, Alon Eizenberg, Joel Waldfogel
Optimal Product Variety In Radio Markets, Steven T. Berry, Alon Eizenberg, Joel Waldfogel
Cowles Foundation Discussion Papers
A vast theoretical literature shows that inefficient market structures may arise in free entry equilibria. Previous empirical work demonstrated that excessive entry may obtain in local radio markets. Our paper extends that literature by relaxing the assumption that stations are symmetric, allowing instead for endogenous station differentiation along both (observed) horizontal and (unobserved) vertical dimensions. We find that, in most broadcasting formats, a social planner who takes into account the welfare of market participants (stations and advertisers) would eliminate 50%–60% of the stations observed in equilibrium. In 80%–94.9% of markets that have high quality stations in the observed equilibrium, welfare …
Long Term Effects Of “Prosperity In Youth” On Consumption: Evidence From China, K. Sudhir, Ishani Tewari
Long Term Effects Of “Prosperity In Youth” On Consumption: Evidence From China, K. Sudhir, Ishani Tewari
Cowles Foundation Discussion Papers
We test for the long-term impact of experiencing “prosperity in youth” (PIY) on non-traditional category consumption. Using unique twenty-year panel data of individuals from nine Chinese provinces with varying levels of per-capita GDP and rates of per-capita GDP growth, we find robust evidence for the PIY effect. We find both a direct effect of one’s own prosperity and an indirect effect of the prosperity of one’s province during youth on long-term consumption. In particular, the indirect PIY effect is driven more strongly by individuals with low incomes during youth — suggesting that norms and aspirations created by the consumption of …
Long Term Effects Of Experience During Youth: Evidence From Consumptions In China, K. Sudhir, Ishani Tewari
Long Term Effects Of Experience During Youth: Evidence From Consumptions In China, K. Sudhir, Ishani Tewari
Cowles Foundation Discussion Papers
We test for the long-term effects of experience during youth on consumption in nontraditional taste-forming categories. A unique dataset that tracks individuals over twenty years from 1992-2011, residing in nine Chinese provinces that vary widely in both income levels and rate of economic growth, helps us identify cohort and intra-cohort “prosperity-inyouth” (PIY) effects on consumption. We first demonstrate that non-traditional category consumption increases strongly among cohorts that entered adulthood during China’s boom years. We then show evidence of the intra-cohort PIY effect, controlling for individual level experience by leveraging the heterogeneity in the timing and rate of growth in prosperity …
Are We Approaching An Economic Singularity? Information Technology And The Future Of Economic Growth, William D. Nordhaus
Are We Approaching An Economic Singularity? Information Technology And The Future Of Economic Growth, William D. Nordhaus
Cowles Foundation Discussion Papers
What are the prospects for long-run economic growth?, the present study looks at a more recently launched hypothesis, which I label Singularity . The idea here is that rapid growth in computation and artificial intelligence will cross some boundary or Singularity after which economic growth will accelerate sharply as an ever-accelerating pace of improvements cascade through the economy. The paper develops a growth model that features Singularity and presents several tests of whether we are rapidly approaching Singularity. The key question for Singularity is the substitutability between information and conventional inputs. The tests suggest that the Singularity is not near.
Modeling Uncertainty In Climate Change: A Multi‐Model Comparison, Kenneth Gillingham, William D. Nordhaus, David Anthoff, Geoffrey Blanford, Valentina Bosetti, Peter Christensen, Haewon Mcjeon
Modeling Uncertainty In Climate Change: A Multi‐Model Comparison, Kenneth Gillingham, William D. Nordhaus, David Anthoff, Geoffrey Blanford, Valentina Bosetti, Peter Christensen, Haewon Mcjeon
Cowles Foundation Discussion Papers
The economics of climate change involves a vast array of uncertainties, complicating both the analysis and development of climate policy. This study presents the results of the first comprehensive study of uncertainty in climate change using multiple integrated assessment models. The study looks at model and parametric uncertainties for population, total factor productivity, and climate sensitivity. It estimates the pdfs of key output variables, including CO 2 concentrations, temperature, damages, and the social cost of carbon (SCC). One key finding is that parametric uncertainty is more important than uncertainty in model structure. Our resulting pdfs also provide insights on tail …
First Price Auctions With General Information Structures: Implications For Bidding And Revenue, Dirk Bergemann, Benjamin Brooks, Stephen Morris
First Price Auctions With General Information Structures: Implications For Bidding And Revenue, Dirk Bergemann, Benjamin Brooks, Stephen Morris
Cowles Foundation Discussion Papers
We explore the impact of private information in sealed-bid first-price auctions. For a given symmetric and arbitrarily correlated prior distribution over values, we characterize the lowest winning-bid distribution that can arise across all information structures and equilibria. The information and equilibrium attaining this minimum leave bidders indifferent between their equilibrium bids and all higher bids. Our results provide lower bounds for bids and revenue with asymmetric distributions over values. We also report further characterizations of revenue and bidder surplus including upper bounds on revenue. Our work has implications for the identification of value distributions from data on winning bids and …
Efficient Estimation Of Multivariate Semi-Nonparametric Garch Filtered Copula Models, Xiaohong Chen, Zhuo Huang, Yanping Yi
Efficient Estimation Of Multivariate Semi-Nonparametric Garch Filtered Copula Models, Xiaohong Chen, Zhuo Huang, Yanping Yi
Cowles Foundation Discussion Papers
This paper considers estimation of semi-nonparametric GARCH filtered copula models in which the individual time series are modelled by semi-nonparametric GARCH and the joint distributions of the multivariate standardized innovations are characterized by parametric copulas with nonparametric marginal distributions. The models extend those of Chen and Fan (2006) to allow for semi-nonparametric conditional means and volatilities, which are estimated via the method of sieves such as splines. The fitted residuals are then used to estimate the copula parameters and the marginal densities of the standardized innovations jointly via the sieve maximum likelihood (SML). We show that, even using nonparametrically filtered …
Information And Market Power, Dirk Bergemann, Tibor Heumann, Stephen Morris
Information And Market Power, Dirk Bergemann, Tibor Heumann, Stephen Morris
Cowles Foundation Discussion Papers
We consider demand function competition with a finite number of agents and private information. We analyze how the structure of the private information shapes the market power of each agent and the price volatility. We show that any degree of market power can arise in the unique equilibrium under an information structure that is arbitrarily close to complete information. In particular, regardless of the number of agents and the correlation of payoff shocks, market power may be arbitrarily close to zero (so we obtain the competitive outcome) or arbitrarily large (so there is no trade in equilibrium). By contrast, price …
First Price Auctions With General Information Structures: Implications For Bidding And Revenue, Dirk Bergemann, Benjamin Brooks, Stephen Morris
First Price Auctions With General Information Structures: Implications For Bidding And Revenue, Dirk Bergemann, Benjamin Brooks, Stephen Morris
Cowles Foundation Discussion Papers
We explore the impact of private information in sealed bid first price auctions. For a given symmetric and arbitrarily correlated prior distribution over values, we characterize the lowest winning bid distribution that can arise across all information structures and equilibria. The information and equilibrium attaining this minimum leave bidders uncertain whether they will win or lose and indifferent between their equilibrium bids and all higher bids. Our results provide lower bounds for bids and revenue with asymmetric distributions over values. We report further analytic and computational characterizations of revenue and bidder surplus including upper bounds on revenue. Our work has …
First Price Auctions With General Information Structures: Implications For Bidding And Revenue, Dirk Bergemann, Benjamin Brooks, Stephen Morris
First Price Auctions With General Information Structures: Implications For Bidding And Revenue, Dirk Bergemann, Benjamin Brooks, Stephen Morris
Cowles Foundation Discussion Papers
We explore the impact of private information in sealed-bid first-price auctions. For a given symmetric and arbitrarily correlated prior distribution over values, we characterize the lowest winning-bid distribution that can arise across all information structures and equilibria. The information and equilibrium attaining this minimum leave bidders indifferent between their equilibrium bids and all higher bids. Our results provide lower bounds for bids and revenue with asymmetric distributions over values. We report further analytic and computational characterizations of revenue and bidder surplus including upper bounds on revenue. Our work has implications for the identification of value distributions from data on winning …
Team Production, Endogenous Learning About Abilities And Career Concerns, Evangelia Chalioti
Team Production, Endogenous Learning About Abilities And Career Concerns, Evangelia Chalioti
Cowles Foundation Discussion Papers
This paper studies career concerns in teams where the support a worker receives depends on fellow team members’ effort and ability. In this setting, by exerting effort and providing support, a worker can influence her own and her teammates’ performances in order to bias the learning process in her favor. To manipulate the market’s assessments, we argue that in equilibrium, a worker has incentives to help or even sabotage her colleagues in order to signal that she is of higher ability. In a multiperiod stationary framework, we show that the stationary level of work effort is above and help effort …
First Price Auctions With General Information Structures: Implications For Bidding And Revenue, Dirk Bergemann, Benjamin Brooks, Stephen Morris
First Price Auctions With General Information Structures: Implications For Bidding And Revenue, Dirk Bergemann, Benjamin Brooks, Stephen Morris
Cowles Foundation Discussion Papers
This paper explores the consequences of information in sealed bid first price auctions. For a given symmetric and arbitrarily correlated prior distribution over valuations, we characterize the set of possible outcomes that can arise in a Bayesian equilibrium for some information structure. In particular, we characterize maximum and minimum revenue across all information structures when bidders may not know their own values, and maximum revenue when they do know their values. Revenue is maximized when buyers know who has the highest valuation, but the highest valuation buyer has partial information about others’ values. Revenue is minimized when buyers are uncertain …
Identification In Differentiated Products Markets, Steven T. Berry, Philip A. Haile
Identification In Differentiated Products Markets, Steven T. Berry, Philip A. Haile
Cowles Foundation Discussion Papers
Empirical models of demand for — and, often, supply of — differentiated products are widely used in practice, typically employing parametric functional forms and distributions of consumer heterogeneity. We review some recent work studying identification in a broad class of such models. This work shows that parametric functional forms and distributional assumptions are not essential for identification. Rather, identification relies primarily on the standard requirement that instruments be available for the endogenous variables — here, typically, prices and quantities. We discuss the kinds of instruments needed for identification and how the reliance on instruments can be reduced by nonparametric functional …
Introduction To Jet Symposium Issue On ‘Dynamic Contracts And Mechanism Design, Dirk Bergemann, Alessandro Pavan
Introduction To Jet Symposium Issue On ‘Dynamic Contracts And Mechanism Design, Dirk Bergemann, Alessandro Pavan
Cowles Foundation Discussion Papers
The Introduction to the Symposium Issue on “Dynamic Contract and Mechanism Design” of the Journal of Economic Theory provides an overview of the dynamic mechanism design literature. We then introduce the papers that are contained in the Symposium issue and finally conclude by discussing avenues for future research. Several of the papers contained in the Symposium issue were presented at the Economic Theory Workshop of the Cowles Foundation for Research in Economics at Yale University in June 2013.
Information And Market Power, Dirk Bergemann, Tibor Heumann, Stephen Morris
Information And Market Power, Dirk Bergemann, Tibor Heumann, Stephen Morris
Cowles Foundation Discussion Papers
We analyze demand function competition with a finite number of agents and private information. We show that the nature of the private information determines the market power of the agents and thus price and volume of equilibrium trade. We establish our results by providing a characterization of the set of all joint distributions over demands and payoff states that can arise in equilibrium under any information structure. In demand function competition, the agents condition their demand on the endogenous information contained in the price. We compare the set of feasible outcomes under demand function to the feasible outcomes under Cournot …
Identification Of Nonparametric Simultaneous Equations Models With A Residual Index Structure, Steven T. Berry, Philip A. Haile
Identification Of Nonparametric Simultaneous Equations Models With A Residual Index Structure, Steven T. Berry, Philip A. Haile
Cowles Foundation Discussion Papers
We present new identification results for a class of nonseparable nonparametric simultaneous equations models introduced by Matzkin (2008). These models combine traditional exclusion restrictions with a requirement that each structural error enter through a “residual index.” Our identification results are constructive and encompass a range of special cases with varying demands on the exogenous variation provided by instruments and the shape of the joint density of the structural errors. The most important of these results demonstrate identification even when instruments have limited variation. A genericity result demonstrates a formal sense in which the associated density conditions may be viewed as …
Inference In Near Singular Regression, Peter C.B. Phillips
Inference In Near Singular Regression, Peter C.B. Phillips
Cowles Foundation Discussion Papers
This paper considers stationary regression models with near-collinear regressors. Limit theory is developed for regression estimates and test statistics in cases where the signal matrix is nearly singular in finite samples and is asymptotically degenerate. Examples include models that involve evaporating trends in the regressors that arise in conditions such as growth convergence. Structural equation models are also considered and limit theory is derived for the corresponding instrumental variable estimator, Wald test statistic, and overidentification test when the regressors are endogenous.