Social and Behavioral Sciences Commons^™

The Doors Of Perception, Gary Charness, Alessandro Sontuoso

ESI Working Papers

We investigate how a player’s strategic behavior is affected by the set of notions she uses in thinking about the game, i.e., the “frame”. To do so, we consider matching games where two players are presented with a set of objects, from which each player must privately choose one (with the goal of matching the counterpart’s choice). We propose a novel theory positing that different player types are aware of different attributes of the strategy options, hence different frames; we then rationalize why differences in players’ frames may lead to differences in choice behavior. Unlike previous theories of framing, our …

The Proximity Effect Of The Seattle Link Public Light Rail On King County Properties, Graham Byron

Economics Theses

Seattle has experienced an explosive rise in population in the last decade and there is no sign of this slowing down. There is a wealth of literature surrounding the way in which public transportation has an effect on the surrounding housing values however no hedonic study has been done on public transportation in the Seattle area. This study responds to the lack of analysis done on the effect that public transportation has in King County.

We use a difference-in-differences and hedonic model to test the effect that the LINK light rail has on houses within a one-mile radius, particularly at …

Recessions Or Partisanship: What Explains Climate Skepticism In The U.S.?, Abhishek S. Sambatur

Undergraduate Economic Review

This paper investigates the variations in public mood pertaining to climate skepticism and attempts to empirically assess whether economic recessions or partisanship help explain aggregate-level trends and movements across a 16-year time horizon. Public survey data from the iPoll and Gallup Organization were used to construct the Climate Change Skeptic Index (CCSI) that served as a proxy to capture public opinion trends in skepticism across the U.S. A two-part vector autoregressive model suggests that while economic recessions might be causally linked to climate skepticism, partisanship plays a more influential role in explaining it over time. The key result is that …

Is Diamond A Resource Curse For Africa?, Karli Hamrick

Undergraduate Economic Review

This paper investigates the resource curse in diamond exporting industry in African countries. The empirical evidence about the “resource curse” is mixed in literature and almost none has been done regarding diamond. Our study aims to bridge that gap. The results suggest that diamond export is positively correlated with well-being in a group of African countries. In other words, the “resource curse” may not occur in diamond mining industry after the Kimberly Process (KP) was put in place in 2002. We argue that the KP serves as a good institution and has created good incentives for firms in the industry. …

Is Our Coal-Onial Era Ending Anytime Soon?, Hadiqa Faraz

Undergraduate Economic Review

In this paper, I estimate the long-run co-integrated relationship between energy demand and economic growth for 20 countries from the year 2000 to 2016. I use panel unit-root and heterogeneous panel co-integration tests to test for non-stationarity of the panels and to determine whether there is a long-run link between energy consumption and GDP per capita. The estimated model uses a first-difference OLS model to estimate income elasticity of energy demand; the empirical results of this model show that there is a long-run relationship between energy consumption per capita and GDP per capita. In the long-term, on average, with 1% …

Rhode Island Current Conditions Index -- December 2019, Leonard Lardaro

The Rhode Island Current Conditions Index

No abstract provided.

Sieve Estimation Of Time-Varying Panel Data Models With Latent Structures, Liangjun Su, Xia Wang, Sainan Jin

Research Collection School Of Economics

We propose a heterogeneous time-varying panel data model with a latent group structure that allows the coefficients to vary over both individuals and time. We assume that the coefficients change smoothly over time and form different unobserved groups. When treated as smooth functions of time, the individual functional coefficients are heterogeneous across groups but homogeneous within a group. We propose a penalized-sieve-estimation-based classifier-Lasso (C-Lasso) procedure to identify the individuals’ membership and to estimate the group-specific functional coefficients in a single step. The classification exhibits the desirable property of uniform consistency. The C-Lasso estimators and their post-Lasso versions achieve the oracle …

Detecting Financial Collapse And Ballooning Sovereign Risk, Peter C. B. Phillips, Sp Shi

Research Collection School Of Economics

This paper proposes a new model for capturing discontinuities in the underlying financial environment that can lead to abrupt falls, but not necessarily sustained monotonic falls, in asset prices. This notion of price dynamics is consistent with existing understanding of market crashes, which allows for a mix of market responses that are not universally negative. The model may be interpreted as a martingale composed with a randomized drift process that is designed to capture various asymmetric drivers of market sentiment. In particular, the model is capable of generating realistic patterns of price meltdowns and bond yield inflations that constitute major …

Har Testing For Spurious Regression In Trend, Peter C. B. Phillips, Xiaohu Wang, Yonghui Zhang

Research Collection School Of Economics

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 …

Finance And Ideology: The Firm-Level Channels, Hao Liang, Rong Wang, Haikun Zhu

Research Collection Lee Kong Chian School Of Business

We provide firm-level evidence on how politicians’ ideologies affect economic outcomes and financial development by exploring a unique setting of ideological discontinuity in China from Maoism to Dengism around 1978. We find the ideological exposure during a politician’s early adulthood has an enduring effect on contemporary firm and city policies. Firms governed by “Mao’s mayors” have more stakeholder spending, lower pay inequality, and less internationalization than those governed by Deng’s. Further evidence suggests politicians’ ideology may affect economic activities through channels other than economic policy. Selection bias, endogenous matching and mayor age effect are unlikely to drive our results.

Uniform Inference In Panel Autoregression, John C. Chao, Peter C. B. Phillips

Research Collection School Of Economics

This paper considers estimation and inference concerning the autoregressive coefficient (rho) in a panel autoregression for which the degree of persistence in the time dimension is unknown. Our main objective is to construct confidence intervals for rho that are asymptotically valid, having asymptotic coverage probability at least that of the nominal level uniformly over the parameter space. The starting point for our confidence procedure is the estimating equation of the Anderson-Hsiao (AH) IV procedure. It is well known that the AH IV estimation suffers from weak instrumentation when rho is near unity. But it is not so well known that …

News-Driven Expectations And Volatility Clustering, Sabiou M. Inoua

ESI Working Papers

Financial volatility obeys two well-established empirical properties: it is fat-tailed (power-law distributed) and it tends to be clustered in time. Many interesting models have been proposed to account for these regularities, notably agent-based computational models, which typically invoke complicated mechanisms, however. It can be shown that trend-following speculation generates the power law in an intrinsic way. But this model cannot exaplain clustered volatility. This paper extends the model and offers a simple explanation for clustered volatility: the impact of exogenous news on traders’ expectations. Owing to the famous no-trade results, rational expectations, the dominant model of news-driven expectations, is hard …

Harnessing The Power Of Social Incentives To Curb Shirking In Teams, Brice Corgnet, Brian C. Gunia, Roberto Hernán González

ESI Working Papers

We study several solutions to shirking in teams that trigger social incentives by reshaping the workplace social context. Using an experimental design, we manipulate social pressure at work by varying the type of workplace monitoring and the extent to which employees engage in social interaction. This design allows us to assess the effectiveness as well as the popularity of each solution. Despite similar effectiveness in boosting productivity across solutions, only organizational systems involving social interaction (via chat) were at least as popular as a baseline treatment. This suggests that any solution based on promoting social interaction is more likely to …

Price Signaling And Bargain Hunting In Markets With Partially Informed Populations, Mark Schneider, Daniel Graydon Stephenson

ESI Working Papers

Classical studies of asymmetric information focus on situations where only one side of a market is informed. This study experimentally investigates a more general case where some sellers are informed and some buyers are informed. We establish the existence of semiseparating perfect Bayesian equilibria where prices serve as informative signals of quality to uninformed buyers, while informed buyers can often leverage their informational advantage by purchasing high quality items from uninformed sellers at bargain prices. These models provide a rational foundation for the co-existence of bargains, price signaling, and Pareto efficiency in markets with asymmetric information. We test these theoretical …

Understanding The Characteristics Of Remittance Recipients In Venezuela: A Country In Economic Crisis, Nicole A. Degla

Undergraduate Economic Review

This essay analyzes household surveys from the World Bank Global Financial Inclusion Database for the years 2011, 2014, and 2017, as a means to distinguish individual level characteristics of remittance recipients in Venezuela. Remittances are defined as “crossborder, person-to-person payments of relatively low value. The transfers are typically recurrent payments by migrant workers to their relatives in their home countries (World Bank, 2015). Through the use of a linear probability model and probit regressions, I examine the variables age, gender, education level, and income quintile. Results of the analysis find that age has a statistically significant negative effect on the …

Do Appeals To Donor Benefits Raise More Money Than Appeals To Recipient Benefits? Evidence From A Natural Field Experiment With Pick.Click.Give., John A. List, James J. Murphy, Michael K. Price, Alexander G. James

ESI Working Papers

We partnered with Alaska’s Pick.Click.Give. Charitable Contributions Program to implement a statewide natural field experiment with 540,000 Alaskans designed to explore whether targeted appeals emphasizing donor benefits through warm glow impact donations. Results highlight the relative import of appeals to self. Individuals who received such an appeal were 4.5 percent more likely to give and gave 20 percent more than counterparts in the control group. Yet, a message that instead appealed to recipient benefits had no effect on average donations relative to the control group. We also find evidence of long-run effects of warm glow appeals in the subsequent year.

A Class Of N-Player Colonel Blotto Games With Multidimensional Private Information, Christian Ewerhart, Dan Kovenock

ESI Working Papers

We consider a class of incomplete-information Colonel Blotto games in which N ≥ 2 agents are engaged in (N + 1) battlefields. An agent’s vector of battlefield valuations is drawn from a generalized sphere in L_p-space. We identify a Bayes-Nash equilibrium in which any agent’s resource allocation to a given battlefield is strictly monotone in the agent’s valuation of that battlefield. In contrast to the single-unit case, however, agents never enjoy any information rent. We also outline an extension to networks of Blotto games.

Cooperation In Indefinitely Repeated Helping Games: Existence And Characterization, Gabriele Camera, Alessandro Gioffré

ESI Working Papers

Experiments that investigate the spontaneous emergence of money in laboratory societies rely on indefinitely repeated helping games with random matching (Camera et al., 2013; Camera and Casari, 2014). An important open issue is the lack of a general proof of existence of an equilibrium capable of supporting the efficient allocation under private monitoring, without money. Here, we fill this gap by offering a general proof, as well as by characterizing the efficient non-monetary equilibrium. This technique can be extended to study games with simultaneous actions.

Rhode Island Current Conditions Index -- November 2019, Leonard Lardaro

The Rhode Island Current Conditions Index

No abstract provided.

Quantifying Quality Specialization Across Space: Skills, Sorting, And Agglomeration, Pao-Li Chang, Angdi Lu, Xin Yi

Research Collection School Of Economics

We quantify the supply-side determinants of quality specialization across space. Specifically, we complement the quality specialization literature in international trade and study how larger cities specialize in higher-quality goods within a country. In our general equilibrium model, firms in larger cities produce goods with higher quality, because agglomeration benefits accrue more to skilled workers who are also more efficient in upgrading quality. Two channels are at work in our model. The first channel is through the treatment effect of agglomeration, such that firms become more productive if they locate in a larger city. The second channel works through sorting, in …

Breaking Up: Experimental Insights Into Economic (Dis)Integration, Gabriele Camera, Lukas Hohl, Rolf Weder

ESI Working Papers

Standard international economic theory suggests that people should embrace economic integration because it promises large gains. But recent events such as Brexit indicate a desire for economic disintegration. Here we report results of an experiment, based on a strategic analytical framework, of how size and distribution of potential gains from integration influence outcomes and individuals’ inclination to embrace integration. We find that cross-country inequality in potential gains acts as a friction to realize those gains. This suggests that to better understand recent phenomena, international economic theory should account for distributional considerations and behavioral aspects it currently ignores.

Persistence And Cyclical Dynamics Of Us And Uk House Prices: Evidence From Over 150 Years Of Data, Giorgio Canarella, Luis Gil-Alana, Rangan Gupta, Stephen M. Miller

Economics Faculty Publications

This paper provides a new and unique look at the dynamics and persistence of historical house prices in the USA and the UK using fractional integration techniques not previously applied to housing markets. Unlike previous research, we consider two components of persistence of house prices: the component associated with the long-run trend and the component associated with the cycle. We find evidence of cyclical and long-run persistence in the UK housing markets. In contrast, we fail to find evidence of cyclical persistence for the USA. For the sub-samples, which account for a structural break in each series, an important difference …

Rhode Island Current Conditions Index -- October 2019, Leonard Lardaro

The Rhode Island Current Conditions Index

No abstract provided.

Non-Separable Models With High-Dimensional Data, Liangjun Su, T Ura, Yc Zhang

Research Collection School Of Economics

This paper studies non-separable models with a continuous treatment when the dimension of the control variables is high and potentially larger than the effective sample size. We propose a three-step estimation procedure to estimate the average, quantile, and marginal treatment effects. In the first stage we estimate the conditional mean, distribution, and density objects by penalized local least squares, penalized local maximum likelihood estimation, and numerical differentiation, respectively, where control variables are selected via a localized method of L-1-penalization at each value of the continuous treatment. In the second stage we estimate the average and marginal distribution of the potential …

Make It Too Difficult And I’Ll Give-Up; Let Me Succeed And I’Ll Excel: The Interaction Between Assigned And Personal Goals, James Fan, Joaquin Gomez-Minambres, Samuel Smithers

ESI Working Papers

We examine the motivational effects of setting both assigned and personal non-binding goals on a real effort laboratory experiment. In order to derive conjectures for our experiment, we develop a model with goal-dependent preferences. In line with previous studies, we find that goal setting leads to a higher performance. We also find that goal-setting is most effective if subjects were able to achieve previous goals. Therefore, in goal setting, “success breeds success”. In particular, we observe that when subjects are initially allowed to attain assigned goals, they are better at self-motivating in the future when performing under personal goals.

Investment Choice Architecture In Trust Games: When “All-In” Is Not Enough, Joaquin Gómez-Miñambres, Eric Schniter, Timothy W. Shields

ESI Working Papers

While many economic interactions feature “All-or-Nothing” options nudging investors towards going “all-in”, such designs may unintentionally affect reciprocity. We manipulate the investor’s action space in two versions of the “trust game”. In one version investors can invest either “all” their endowment or “nothing”. In the other version, they can invest any amount of the endowment. Consistent with our intentions-based model, we show that "all-or-nothing” designs coax more investment but limit investors’ demonstrability of intended trust. As a result, “all-in” investors are less generously reciprocated than when they can invest any amount, where full investments are a clearer signal of trustworthiness.

Labor Contracts, Gift-Exchange And Reference Wages: Your Gift Need Not Be Mine!, Hernán Bejerano, Brice Corgnet, Joaquín Gómez-Miñambres

ESI Working Papers

We extend Akerlof’s (1982) gift-exchange model to the case in which reference wages respond to changes in the work environment such as those related to unemployment benefits or workers’ productivity levels. Our model shows that these changes spur disagreements between workers and employers regarding the value of the reference wage. These disagreements tend to weaken the gift-exchange relationship thus reducing production levels and wages. We find support for these predictions in a controlled, yet realistic, workplace environment. Our work also sheds light on several stylized facts regarding employment relationships such as the increased intensity of labor conflicts when economic conditions …

How Do Interest Rates Affect Market Capitalization Growth Rates In The Us?, Philip Carolin

Undergraduate Economic Review

This paper investigates how interest rates affect the market capitalization growth rate of individual companies in the US. The research will distinguish itself from previous literature as it analyzes company and macroeconomic data after the 2008 recession. This is particularly interesting as interest rates have been historically low in this time period. Previous research suggests that since the Great Recession the effects of interest rate changes have decreased. On the contrary I will argue that the effects of interest rates still appear to be significant and substantial when explaining the market capitalization growth rate.

Give Me A Challenge Or Give Me A Raise, Aleksandr Alekseev

ESI Working Papers

I study the effect of task difficulty on workers' effort and compare it to the effect of monetary rewards in an incentivized lab experiment. I find that task difficulty has an inverse-U effect on effort, and that this effect is quantitatively large when compared to the effect of conditional monetary rewards. Difficulty acts as a mediator of monetary rewards: conditional rewards are most effective at the intermediate or high levels of difficulty. I show that the inverse-U pattern of effort response to difficulty is not consistent with the Expected Utility model but is consistent with the Rank-Dependent Utility model that …

The Effect Of Inflation Targeting Policies On Dollarization-A Cross-Country Analysis, Dweepobotee Brahma

The Hilltop Review

This paper attempts to review the experiences of various dollarized economies from the adoption of an explicit inflation-targeting framework for domestic monetary policy. Dollarization is the phenomenon where agents in a country choose to use a foreign currency instead of their domestic currency. This often occurs in response to episodes of high inflation rate in the domestic economy. Central Banks of these countries often respond by adopting an inflation-targeting regime. This paper attempts to evaluate the effectiveness of such a policy by conducting a cross-country comparison. A panel dataset from 14 dollarized economies from 2001-2015, is used to compare between …