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Full-Text Articles in Social and Behavioral Sciences

Challenges To Social Mobility In Singapore, Kong Weng Ho, Marcus Kheng Tat Tan Jul 2020

Challenges To Social Mobility In Singapore, Kong Weng Ho, Marcus Kheng Tat Tan

Research Collection School Of Economics

Singapore had achieved impressive economic growth together with a high level of upward mobility since her independence in 1965. However, the growth process might have become more uneven, in addition to diminishing growth for a matured economy like Singapore, which is also a highly open city state subject to competitive forces from other economies. Singapore has fared well recently,
evident from the 2020 social mobility findings reported by the World Economic Forum and the decline in Gini coefficients for the past decade. We discuss the education system in Singapore and the recently formed National Jobs Council, both important institutions for ...


Deviance Information Criterion For Latent Variable Models And Misspecified Models, Yong Li, Jun Yu, Tao Zeng Jun 2020

Deviance Information Criterion For Latent Variable Models And Misspecified Models, Yong Li, Jun Yu, Tao Zeng

Research Collection School Of Economics

Deviance information criterion (DIC) has been widely used for Bayesian model comparison, especially after Markov chain Monte Carlo (MCMC) is used to estimate candidate models. This paper first studies the problem of using DIC to compare latent variable models when DIC is calculated from the conditional likelihood. In particular, it is shown that the conditional likelihood approach undermines theoretical underpinnings of DIC. A new version of DIC, namely DICL, is proposed to compare latent variable models. The large sample properties of DICL are studied. A frequentist justification of DICL is provided. Like AIC, DICL provides an asymptotically unbiased estimator to ...


Estimating The Benefits And Costs Of Forming Business Partnerships, Jungho Lee Jun 2020

Estimating The Benefits And Costs Of Forming Business Partnerships, Jungho Lee

Research Collection School Of Economics

I estimate a matching model of business‐partnership formation to quantify the relative importance of productivity gains, financing gains, and the coordination failure of effort provision (moral hazard) among partners. Productivity gains account for 61% of the gain from the observed partnerships. For partners in the first quartile of the wealth distribution, however, financing accounts for 93% of the gain. The cost of moral hazard corresponds to 42% of the entire gain from partnerships. A loan policy specifically targeting partnerships is less effective in improving welfare than a conventional loan policy that provides loans to individual entrepreneurs.


Identifying Latent Grouped Patterns In Cointegrated Panels, Wenxin Huang, Sainan Jin, Liangjun Su Jun 2020

Identifying Latent Grouped Patterns In Cointegrated Panels, Wenxin Huang, Sainan Jin, Liangjun Su

Research Collection School Of Economics

We consider a panel cointegration model with latent group structures that allows for heterogeneous long-run relationships across groups. We extend Su, Shi, and Phillips (2016, Econometrica 84(6), 2215-2264) classifier-Lasso (C-Lasso) method to the nonstationary panels and allow for the presence of endogeneity in both the stationary and nonstationary regressors in the model. In addition, we allow the dimension of the stationary regressors to diverge with the sample size. We show that we can identify the individuals' group membership and estimate the group-specific long-run cointegrated relationships simultaneously. We demonstrate the desirable property of uniform classification consistency and the oracle properties ...


Identifying Latent Group Structures In Nonlinear Panels, Wuyi Wang, Liangjun Su May 2020

Identifying Latent Group Structures In Nonlinear Panels, Wuyi Wang, Liangjun Su

Research Collection School Of Economics

We propose a procedure to identify latent group structures in nonlinear panel data models where some regression coefficients are heterogeneous across groups but homogeneous within a group and the group number and membership are unknown. To identify the group structures, we consider the order statistics for the preliminary unconstrained consistent estimators of the regression coefficients and translate the problem of classification into the problem of break detection. Then we extend the sequential binary segmentation algorithm of Bai (1997) for break detection from the time series setup to the panel data framework. We demonstrate that our method is able to identify ...


Detecting Latent Communities In Network Formation Models, Shujie Ma, Liangjun Su, Yichong Zhang May 2020

Detecting Latent Communities In Network Formation Models, Shujie Ma, Liangjun Su, Yichong Zhang

Research Collection School Of Economics

This paper proposes a logistic undirected network formation model which allows for assortative matching on observed individual characteristics and the presence of edge-wise fixed effects. We model the coefficients of observed characteristics to have a latent community structure and the edge-wise fixed effects to be of low rank. We propose a multi-step estimation procedure involving nuclear norm regularization, sample splitting, iterative logistic regression and spectral clustering to detect the latent communities. We show that the latent communities can be exactly recovered when the expected degree of the network is of order log n or higher, where n is the number ...


Efficient Bilateral Trade With Interdependent Values: The Use Of Two-Stage Mechanisms, Takashi Kunimoto, Cuiling Zhang May 2020

Efficient Bilateral Trade With Interdependent Values: The Use Of Two-Stage Mechanisms, Takashi Kunimoto, Cuiling Zhang

Research Collection School Of Economics

As efficient, voluntary bilateral trades are generally not incentive compatible in an interdependent-value environment (Fieseler, Kittsteiner, Moldovanu (2003) and Gresik (1991)), we seek for more positive results by employing two-stage mechanisms (Mezzetti (2004)). We say that a two-stage mechanism satisfies incentive compatibility if the truth-telling in both stages constitutes an equilibrium strategy.First, we show by means of a stylized example that the generalized two-stage Groves mechanism never guarantees voluntary trade, while it satisfies efficiency and incentive compatibility. In a general environment, we next propose Assumption 1 under which there exists a two-stage incentive compatible mechanism implementing an efficient, voluntary ...


Bootstrap Inference For Quantile Treatment Effects In Randomized Experiments With Matched Pairs, Liang Jiang, Xiaobin Liu, Yichong Zhang May 2020

Bootstrap Inference For Quantile Treatment Effects In Randomized Experiments With Matched Pairs, Liang Jiang, Xiaobin Liu, Yichong Zhang

Research Collection School Of Economics

This paper examines inference for quantile treatment effects (QTEs) in randomized experiments with matched-pairs designs (MPDs). We derive the limiting distribution of the QTE estimator under MPDs and highlight the difficulty of analytical inference due to parameter tuning. We show that a naive weighted bootstrap fails to approximate the limiting distribution of the QTE estimator under MPDs because it ignores the dependence structure within the matched pairs. We then propose two bootstrap methods that can consistently approximate that limiting distribution: the gradient bootstrap and the weighted bootstrap of the inverse propensity score weighted (IPW) estimator. The gradient bootstrap is free ...


Asymptotic Theory For Near Integrated Processes Driven By Tempered Linear Processes, Farzad Sabzikar, Qiying Wang, Peter C. B. Phillips May 2020

Asymptotic Theory For Near Integrated Processes Driven By Tempered Linear Processes, Farzad Sabzikar, Qiying Wang, Peter C. B. Phillips

Research Collection School Of Economics

In an early article on near-unit root autoregression, Ahtola and Tiao (1984) studied the behavior of the score function in a stationary first order autoregression driven by independent Gaussian innovations as the autoregressive coefficient approached unity from below. The present paper develops asymptotic theory for near-integrated random processes and associated regressions including the score function in more general settings where the errors are tempered linear processes. Tempered processes are stationary time series that have a semi-long memory property in the sense that the autocovariogram of the process resembles that of a long memory model for moderate lags but eventually diminishes ...


Econometric Methods And Data Science Techniques: A Review Of Two Strands Of Literature And An Introduction To Hybrid Methods, Tian Xie, Jun Yu, Tao Zeng May 2020

Econometric Methods And Data Science Techniques: A Review Of Two Strands Of Literature And An Introduction To Hybrid Methods, Tian Xie, Jun Yu, Tao Zeng

Research Collection School Of Economics

The data market has been growing at an exceptional pace. Consequently, more sophisticated strategies to conduct economic forecasts have been introduced with machine learning techniques. Does machine learning pose a threat to conventional econometric methods in terms of forecasting? Moreover, does machine learning present great opportunities to cross-fertilize the field of econometric forecasting? In this report, we develop a pedagogical framework that identifies complementarity and bridges between the two strands of literature. Existing econometric methods and machine learning techniques for economic forecasting are reviewed and compared. The advantages and disadvantages of these two classes of methods are discussed. A class ...


Forecast Combinations In Machine Learning, Yue Qiu, Tian Xie, Jun Yu May 2020

Forecast Combinations In Machine Learning, Yue Qiu, Tian Xie, Jun Yu

Research Collection School Of Economics

This paper introduces novel methods to combine forecasts made by machine learning techniques. Machine learning methods have found many successful applications in predicting the response variable. However, they ignore model uncertainty when the relationship between the response variable and the predictors is nonlinear. To further improve the forecasting performance, we propose a general framework to combine multiple forecasts from machine learning techniques. Simulation studies show that the proposed machine-learning-based forecast combinations work well. In empirical applications to forecast key macroeconomic and financial variables, we find that the proposed methods can produce more accurate forecasts than individual machine learning techniques and ...


Foreign Direct Investment And Industrial Agglomeration: Evidence From China, Wen-Tai Hsu, Yi Lu, Xuan Luo, Lianming Zhu Apr 2020

Foreign Direct Investment And Industrial Agglomeration: Evidence From China, Wen-Tai Hsu, Yi Lu, Xuan Luo, Lianming Zhu

Research Collection School Of Economics

This paper studies the effect of foreign direct investment (FDI) on industrial ag-glomeration. Using the differential effects of FDI deregulation in 2002 in China on different industries, we find that FDI actually affects industrial agglomeration neg-atively. As FDI brings technological spillovers and various agglomeration benefits, other forces must be at work to drive our empirical finding. We propose a simple theory that FDI may discourage industrial agglomeration due to fiercer competition pressure. We find various evidence on this competition mechanism. We also examine an alternative theory based on spatial political competition, but find no evidence sup-porting it. On industrial growth ...


Robust Implementation In Rationalizable Strategies In General Mechanisms, Takashi Kunimoto, Rene Saran Apr 2020

Robust Implementation In Rationalizable Strategies In General Mechanisms, Takashi Kunimoto, Rene Saran

Research Collection School Of Economics

A social choice function (SCF) is robustly implementable in rationalizable strate-gies if every rationalizable strategy profile on every type space results in outcomes consistent with it. First, we establish an equivalence between robust implementation in rationalizable strategies and “weak rationalizable implementation”. Second, using the equivalence result, we identify weak robust monotonicity as a necessary and al-most sufficient condition for robust implementation in rationalizable strategies. This exhibits a contrast with robust implementation in interim equilibria, i.e., every equilib-rium on every type space achieves outcomes consistent with the SCF. Bergemann and Morris (2011) show that strict robust monotonicity is a necessary ...


Kernel-Based Inference In Time-Varying Coefficient Cointegrating Regression, Degui Li, Peter C. B. Phillips, Jiti Gao Apr 2020

Kernel-Based Inference In Time-Varying Coefficient Cointegrating Regression, Degui Li, Peter C. B. Phillips, Jiti Gao

Research Collection School Of Economics

This paper studies nonlinear cointegrating models with time-varying coefficients and multiple nonstationary regressors using classic kernel smoothing methods to estimate the coefficient functions. Extending earlier work on nonstationary kernel regression to take account of practical features of the data, we allow the regressors to be cointegrated and to embody a mixture of stochastic and deterministic trends, complications which result in asymptotic degeneracy of the kernel-weighted signal matrix. To address these complications new local and global rotation techniques are introduced to transform the covariate space to accommodate multiple scenarios of induced degeneracy. Under regularity conditions we derive asymptotic results that differ ...


Urbanization Policy And Economic Development: A Quantitative Analysis Of China’S Differential Hukou Reforms, Wen-Tai Hsu, Lin Ma Mar 2020

Urbanization Policy And Economic Development: A Quantitative Analysis Of China’S Differential Hukou Reforms, Wen-Tai Hsu, Lin Ma

Research Collection School Of Economics

The household registration system (hukou system) in China has hampered rural-urban mi-gration by posing large migration friction. The system has been gradually relaxed in the past few decades, but the reforms have been differential in city size and by the coastal-inland di-vide. We find a striking contrast in the migration patterns between years 2005 and 2015; rural people tended to move more to the coastal urban region in 2005, but more to the inland urban region in 2015. We calibrate a spatial quantitative model to the world economy in both years with China being divided into the rural, coastal urban ...


Estimation Of Fixed Effects Spatial Dynamic Panel Data Models With Small T And Unknown Heteroskedasticity, Liyao Li, Zhenlin Yang Mar 2020

Estimation Of Fixed Effects Spatial Dynamic Panel Data Models With Small T And Unknown Heteroskedasticity, Liyao Li, Zhenlin Yang

Research Collection School Of Economics

We consider the estimation and inference of fixed effects (FE) spatial dynamic panel data (SDPD) models under small T and unknown heteroskedasticity by extending the M-estimation strategy for homoskedastic FE-SDPD model of Yang (2018, Journal of Econometrics). Unbiased estimating equations are obtained by adjusting the conditional quasi-score functions given the initial observations, leading to M-estimators that are free from the initial conditions and robust against unknown cross-sectional heteroskedasticity. Consistency and asymptotic normality of the proposed M-estimator are established. The standard errors are obtained by representing the estimating equations as sums of martingale differences. Monte Carlo results show that the proposed ...


Specification Tests For Temporal Heterogeneity In Spatial Panel Data Models With Fixed Effects, Yuhong Xu, Zhenlin Yang Mar 2020

Specification Tests For Temporal Heterogeneity In Spatial Panel Data Models With Fixed Effects, Yuhong Xu, Zhenlin Yang

Research Collection School Of Economics

We propose adjusted quasi score (AQS) tests for testing the existence of temporal heterogeneity in slope and spatial parameters in spatial panel data (SPD) models, allowing for the presence of individual-specific and/or time-specific fixed effects (or in general intercept heterogeneity). The SPD model with spatial lag is treated in detail by first considering the model with individual fixed effects only, and then extending it to the model with both individual and time fixed effects. Two types of AQS tests (naïve and robust) are proposed, and their asymptotic properties are presented. These tests are then fully extended to SPD models ...


Sustainable Cooperation In International Trade: A Quantitative Analysis, Yuan Mei Mar 2020

Sustainable Cooperation In International Trade: A Quantitative Analysis, Yuan Mei

Research Collection School Of Economics

How does the presence of multilateral institutions affect the sustainability of trade-policy cooperation? Do free-trade agreements make multilateral cooperation less sustainable? Will countries be more likely to deviate from negotiated tariffs when more trade liberalization realizes in the future? These questions have been studied in theory literature using models that feature repeated games, but have yet to be quantitatively analyzed. In this paper, I propose a methodology to quantitatively characterize the equilibrium strategies on tariffs of various nations in a widely used repeated-game framework. I then apply this methodology to address these questions from a quantitative perspective. The numerical results ...


Hybrid Stochastic Local Unit Roots, Offer Lieberman, Peter C. B. Phillips Mar 2020

Hybrid Stochastic Local Unit Roots, Offer Lieberman, Peter C. B. Phillips

Research Collection School Of Economics

Two approaches have dominated formulations designed to capture small departures from unit root autoregressions. The first involves deterministic departures that include local-to-unity (LUR) and mildly (or moderately) integrated (MI) specifications where departures shrink to zero as the sample size n -> infinity. The second approach allows for stochastic departures from unity, leading to stochastic unit root (STUR) specifications. This paper introduces a hybrid local stochastic unit root (LSTUR) specification that has both LUR and STUR components and allows for endogeneity in the time varying coefficient that introduces structural elements to the autoregression. This hybrid model generates trajectories that, upon normalization, have ...


Why Do Businesses Grow Faster In Urban Areas Than In Rural Areas?, Lee, Jungho, Jianhuan Xu Mar 2020

Why Do Businesses Grow Faster In Urban Areas Than In Rural Areas?, Lee, Jungho, Jianhuan Xu

Research Collection School Of Economics

We document that growth of business earnings is mostly observed among young firmsin metro areas. Three explanations are considered: metro areas attract more-productiveentrepreneurs, and reaching the optimal size takes time due to borrowing constraints;metro areas provide better learning opportunities; and high operating costs in metroareas allow only the productive firms to survive. We use a firm-dynamics model with alocation choice to quantify the extent to which the three theories explain the data. Wefind the first two theories largely explain the high growth among metro, young firms. Ourmodel also suggests the distortion in entrepreneurs’ location choice can induce substantialwelfare loss.


Point Optimal Testing With Roots That Are Functionally Local To Unity, Anna Bykhovskaya, Peter C. B. Phillips Mar 2020

Point Optimal Testing With Roots That Are Functionally Local To Unity, Anna Bykhovskaya, Peter C. B. Phillips

Research Collection School Of Economics

Limit theory for regressions involving local to unit roots (LURs) is now used extensively in time series econometric work, establishing power properties for unit root and cointegration tests, assisting the construction of uniform confidence intervals for autoregressive coefficients, and enabling the development of methods robust to departures from unit roots. The present paper shows how to generalize LUR asymptotics to cases where the localized departure from unity is a time varying function rather than a constant. Such a functional local unit root (FLUR) model has much greater generality and encompasses many cases of additional interest that appear in practical work ...


Common Power Laws For Cities And Spatial Fractal Structures, Tomoya Mori, Tony E. Smith, Wen-Tai Hsu Mar 2020

Common Power Laws For Cities And Spatial Fractal Structures, Tomoya Mori, Tony E. Smith, Wen-Tai Hsu

Research Collection School Of Economics

City-size distributions are known to be well approximated by power laws across a wide range of countries. But such distributions are also meaningful at other spatial scales, such as within certain regions of a country. Using data from China, France, Germany, India, Japan, and the United States, we first document that large cities are significantly more spaced out than would be expected by chance alone. We next construct spatial hierarchies for countries by first partitioning geographic space using a given number of their largest cities as cell centers and then continuing this partitioning procedure within each cell recursively. We find ...


Rationalizable Implementation In Finite Mechanisms, Yi-Chun Chen, Takashi Kunimoto, Yifei Sun, Siyang Xiong Feb 2020

Rationalizable Implementation In Finite Mechanisms, Yi-Chun Chen, Takashi Kunimoto, Yifei Sun, Siyang Xiong

Research Collection School Of Economics

We prove that the Maskin monotonicity condition (by Bergemann, Morris, and Tercieux (2011)) fully characterizes exact rationalizable implementation in an environ-ment with lotteries and transfers. Different from previous papers, our approach possesses many appealing features simultaneously, e.g., infinite mechanisms with no integer game or modulo game are used; no transfer is imposed on any rationalizable profile;the message space is small; the implementation is robust to information perturbationsand continuous in the sense of Oury and Tercieux (2012).


Infrastructure Investment And Travel Time, Yumi Koh, Gea M. Lee Feb 2020

Infrastructure Investment And Travel Time, Yumi Koh, Gea M. Lee

Research Collection School Of Economics

We examine additional travel time that arises as reconstruction of non-functioning bridges gets delayed. Our simulations show that the extent to which a budget increase reduces such additional travel time is rather modest. We show that a substantial portion of the unsolved travel time results from budgetary allocations.


Corrigendum To "On Time-Varying Factor Models: Estimation And Testing" [J. Econometrics 198 (2017) 84-101], Liangjun Su, Xia Wang Feb 2020

Corrigendum To "On Time-Varying Factor Models: Estimation And Testing" [J. Econometrics 198 (2017) 84-101], Liangjun Su, Xia Wang

Research Collection School Of Economics

We note that Su and Wang (2017, On Time-varying Factor Models: Estimation and Testing, Journal of Econometrics 198, 84-101) ignore the bias terms when estimating the time-varying factor models. In this note, we correct the theoretical results on the estimation of time-varying factor models. The asymptotic results for testing the correct specification of time invariant factor loadings are not affected.


Job Duration And Match Characteristics Over The Business Cycle, Ismail Baydur, Toshihiko Mukoyama Feb 2020

Job Duration And Match Characteristics Over The Business Cycle, Ismail Baydur, Toshihiko Mukoyama

Research Collection School Of Economics

This paper studies the cyclical behavior of job separation and the characteristics of matches between workers and jobs. We estimate a proportional hazard model with competing risks, distinguishing between different types of separations. A higher unemployment rate at the start of an employment relationship increases the probability of job-to-job transitions, whereas its effect on employment-to-unemployment transitions is negative. We then build a simple job ladder model to interpret our empirical results. A model with two-dimensional heterogeneity in match (job) characteristics has the same qualitative features as the data. Once the model is extended to include cyclicality in the offered match ...


Local Powers Of Least-Squares-Based Test For Panel Fractional Ornstein-Uhlenbeck Process, Katsuto Tanaka, Weilin Xiao, Jun Yu Feb 2020

Local Powers Of Least-Squares-Based Test For Panel Fractional Ornstein-Uhlenbeck Process, Katsuto Tanaka, Weilin Xiao, Jun Yu

Research Collection School Of Economics

Based on the least squares estimator, this paper proposes a novel method to test the sign of the persistence parameter in a panel fractional Ornstein-Uhlenbeck process with a known Hurst parameter H. Depending on H ∈ (1/2, 1), H = 1/2, or H ∈ (0, 1/2), three test statistics are considered. In the null hypothesis the persistence parameter is zero. Based on a panel of continuous record of observations, the null asymptotic distributions are obtained when T is fixed and N is assumed to go to infinity, where T is the time span of the sample and N is the ...


Restricted Probabilistic Fixed Ballot Rules And Hybrid Domains, Shurojit Chatterji, Souvik Roy, Soumyarup Sadhukhan, Arunava Sen, Huaxia Zeng Jan 2020

Restricted Probabilistic Fixed Ballot Rules And Hybrid Domains, Shurojit Chatterji, Souvik Roy, Soumyarup Sadhukhan, Arunava Sen, Huaxia Zeng

Research Collection School Of Economics

We study Random Social Choice Functions (or RSCFs) in a standard ordinal mech-anism design model. We introduce a new preference domain called a hybrid domain which includes as special cases as the complete domain and the single-peaked domain. We characterize the class of unanimous and strategy-proof RSCFs on these domains and refer to them as Restricted Probabilistic Fixed Ballot Rules (or RPFBRs). These RSCFs are not necessarily decomposable, i.e., cannot be written as a convex combina-tion of their deterministic counterparts. We identify a necessary and sufficient condition under which decomposability holds for anonymous RPFBRs. Finally, we provide an axiomatic ...


Rationalizable Incentives: Interim Implementation Of Sets In Rationalizable Strategies, Takashi Kunimoto, Roberto Serrano Jan 2020

Rationalizable Incentives: Interim Implementation Of Sets In Rationalizable Strategies, Takashi Kunimoto, Roberto Serrano

Research Collection School Of Economics

This paper investigates rationalizable implementation of social choice sets (SCSs) in incomplete information environments. We identify rationalizable incentive compatibility (RIC) as its key condition, argue by means of example that RIC is strictly weaker than the standard Bayesian incentive compatibility (BIC), and show that RIC reduces to BIC when we only consider single-valued SCSs (i.e., social choice functions or SCFs). We next identify additional necessary conditions and, essentially closing the gap be-tween necessity and sufficiency, obtain a sufficiency result for rationalizable implementation in general environments. We also characterize a well-studied class of economic environments in which RIC is essentially ...


Geography, Trade And Power-Law Phenomena, Pao-Li Chang, Wen-Tai Hsu Jan 2020

Geography, Trade And Power-Law Phenomena, Pao-Li Chang, Wen-Tai Hsu

Research Collection School Of Economics

This article reviews interrelated power-law phenomena in geography and trade. Given the empirical evidence on the gravity equation in trade flows across countries and regions, its theoretical underpinnings are reviewed. The gravity equation amounts to saying that trade flows follow a power law in distance (or geographic barriers). It is concluded that in the environment with firm heterogeneity, the power law in firm size is the key condition for the gravity equation to arise. A distribution is said to follow a power law if its tail probability follows a power function in the distribution’s right tail. The second part ...