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Full-Text Articles in Economics

Nonparametric Dynamic Panel Data Models: Kernel Estimation And Specification Testing, Liangjun Su, Xun Lu Oct 2013

Nonparametric Dynamic Panel Data Models: Kernel Estimation And Specification Testing, Liangjun Su, Xun Lu

Research Collection School Of Economics

Motivated by the first-differencing method for linear panel data models, we propose a class of iterative local polynomial estimators for nonparametric dynamic panel data models with or without exogenous regressors. The estimators utilize the additive structure of the first-differenced model—the fact that the two additive components have the same functional form, and the unknown function of interest is implicitly defined as a solution of a Fredholm integral equation of the second kind. We establish the uniform consistency and asymptotic normality of the estimators. We also propose a consistent test for the correct specification of linearity in typical dynamic panel data …

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Robust Virtual Implementation With Almost Complete Information, Takashi Kunimoto Oct 2013

Robust Virtual Implementation With Almost Complete Information, Takashi Kunimoto

Research Collection School Of Economics

Artemov, Kunimoto, and Serrano (2013a,b, henceforth, AKS) study amechanism design problem where arbitrary restrictions are placed on the setof first-order beliefs of agents. Calling these restrictions Δ, they adopt Δ-rationalizability (Battigalli and Siniscalchi (2003)) and show that Δ-incentivecompatibility and Δ-measurability are necessary and sufficient conditions forrobust virtual implementation. By appropriately defining Δ in order to restrictattention to complete information environments, I exploit the implicationsof AKS and show that the permissive implementation result of Abreu andMatsushima (1992a) is robust to how the underlying type space is specified.However, AKS need to fix a complete information environment throughouttheir analysis and therefore does not …

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Modeling Myopia: Application To Non-Renewable Resource Extraction, Tomoki Fujii Sep 2013

Modeling Myopia: Application To Non-Renewable Resource Extraction, Tomoki Fujii

Research Collection School Of Economics

We develop a parsimonious model of myopia with an infinitesimal period of commitment as an extension to a standard dynamic optimization in a continuous-time environment. We clearly distinguish the processes of planning future controls and choosing the current control, which makes the model both analytically and numerically convenient. In its application to a simple non-renewable resource extraction problem, we show that whether the terminal time is free or fixed determines the appropriateness of the approximation to myopic agents by constant discounting. We also show that the expiry of extraction permits may be useful in the presence of myopia.

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Shrinkage Empirical Likelihood Estimator In Longitudinal Analysis With Time-Dependent Covariates: Application To Modeling The Health Of Filipino Children, Denis H. Y. Leung, Dylan S. Small, Jing Qin, Min Zhu Sep 2013

Shrinkage Empirical Likelihood Estimator In Longitudinal Analysis With Time-Dependent Covariates: Application To Modeling The Health Of Filipino Children, Denis H. Y. Leung, Dylan S. Small, Jing Qin, Min Zhu

Research Collection School Of Economics

The method of generalized estimating equations (GEE) is a popular tool for analysing longitudinal (panel) data. Often, the covariates collected are time-dependent in nature, for example, age, relapse status, monthly income. When using GEE to analyse longitudinal data with time-dependent covariates, crucial assumptions about the covariates are necessary for valid inferences to be drawn. When those assumptions do not hold or cannot be verified, Pepe and Anderson (1994, Communications in Statistics, Simulations and Computation 23, 939–951) advocated using an independence working correlation assumption in the GEE model as a robust approach. However, using GEE with the independence correlation assumption may …

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Heteroskedasticity And Non-Normality Robust Lm Tests Of Spatial Dependence, Badi H. Baltagi, Zhenlin Yang Sep 2013

Heteroskedasticity And Non-Normality Robust Lm Tests Of Spatial Dependence, Badi H. Baltagi, Zhenlin Yang

Research Collection School Of Economics

The standard LM tests for spatial dependence in linear and panel regressions are derived under the normality and homoskedasticity assumptions of the regression disturbances. Hence, they may not be robust against non-normality or heteroskedasticity of the disturbances. Following Born and Breitung (2011), we introduce general methods to modify the standard LM tests so that they become robust against heteroskedasticity and non-normality. The idea behind the robustification is to decompose the concentrated score function into a sum of uncorrelated terms so that the outer product of gradient (OPG) can be used to estimate its variance. We also provide methods for improving …

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Affordable Fares, Sustainable Public Transport: The Fare Review Mechanism Committee Report, Sock Yong Phang Sep 2013

Affordable Fares, Sustainable Public Transport: The Fare Review Mechanism Committee Report, Sock Yong Phang

Research Collection School Of Economics

The public transport system in Singapore is the main mode of transport for the majority of the population. It is important that public transport remains generally affordable and accessible, with measures to help various commuter groups through fare assistance schemes. Household surveys show that public transport has become more affordable as a proportion of monthly household income over the years. Public transport fares have increased, but at a much lower rate than increases in income. At the same time, increasing fuel costs and other changes in the public transport landscape since 2005 mean that the public transport industry faces declining …

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Robust Bayesian Model Selection, Yong Li, Jun Yu Sep 2013

Robust Bayesian Model Selection, Yong Li, Jun Yu

Research Collection School Of Economics

This paper extends the robust Bayesian inference in misspecified models of Müller (2013, Econometrica) to Bayesian model selection of a set of misspecified models. It is shown that when a model is misspecified, under the Kullback-Leibler loss function, the risk associated with Müller's posterior is less (weakly) than that with the original posterior distribution asymptotically. Based on this new result, two new information criteria are proposed for model selection under model misspecification. Sufficient conditions are provided for the risk associated with Müller's posterior to be strictly smaller.

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Grandchild Care, Intergenerational Transfers, And Grandparents’ Labor Supply, Christine Ho Sep 2013

Grandchild Care, Intergenerational Transfers, And Grandparents’ Labor Supply, Christine Ho

Research Collection School Of Economics

One-fifth of children aged below five with employed mothers benefit from grandparent provided child care as their main source of daycare in the U.S. Using data from the Health and Retirement Study, we investigate how grandchild care needs relate to intergenerational transfers of time and money and grandparents’ labor supply behavior. We find that grandparents with a new born grandchild are more likely to provide grandchild care while married grandparents are also more likely to be employed and provide financial help. Grandparents with grandchildren living close by provided higher time transfers while married grandmothers with resident grandchildren also worked longer …

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A Spatial Analysis Of The Italian Second Republic, Massimiliano Landi, Ricardo Pelizzo Sep 2013

A Spatial Analysis Of The Italian Second Republic, Massimiliano Landi, Ricardo Pelizzo

Research Collection School Of Economics

The Optimal Classification method is applied to a newly created data set to provide a spatial map of the Italian Second Republic (1996–2008). A bi-dimensional political space was found in the XIII Legislature and virtually a one-dimensional political space in the XIV and XV Legislatures. In addition, the main dimension is explained along the government–opposition dimension rather than on the traditional left–right dimension. During the Second Republic, Italy experienced changes in the electoral system and in the format of parties. The data are used to discuss the implications of either change on the dimensionality space. It was found that the …

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Geographic Decomposition Of Inequality In Health And Wealth: Evidence From Cambodia, Tomoki Fujii Sep 2013

Geographic Decomposition Of Inequality In Health And Wealth: Evidence From Cambodia, Tomoki Fujii

Research Collection School Of Economics

Applying the small-area estimation methods to Cambodia data, we decompose the total inequality in wealth (consumption) and health (child undernutrition) indicators into within-location and between-location components. Because the knowledge of the pattern of spatial disparity in poverty and undernutrition is important for the geographic targeting of resources, we conduct a geographic decomposition of the variance of the Foster-Greere-Thorbecke index in addition to the standard decomposition exercise based on the generalized entropy measures. We find that a sizable proportion of wealth inequality is due to between-location inequality, whereas health inequality is mainly due to within-location inequality.

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Geographic Decomposition Of Inequality In Health And Wealth: Evidence From Cambodia, Tomoki Fujii Sep 2013

Geographic Decomposition Of Inequality In Health And Wealth: Evidence From Cambodia, Tomoki Fujii

Research Collection School Of Economics

The small-area estimation developed by Elbers, Lanjouw and Lanjouw (2002, 2003), in which a census and a survey are combined to produce the estimates of welfare measures for small geographic areas, has become a standard tool for poverty analysis in developing countries. The small-area estimates are typically plotted on a map, which are commonly called a poverty map. Poverty maps proved useful for policy analysis and formulation, and have become increasingly popular among policy-makers and researchers. In Cambodia, poverty maps have been used by various international organizations, ministries and non-governmental organizations for analyzing the poverty situations for their operation areas, …

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Semiparametric Estimation In Triangular System Equations With Nonstationarity, Jiti Gao, Peter C. B. Phillips Sep 2013

Semiparametric Estimation In Triangular System Equations With Nonstationarity, Jiti Gao, Peter C. B. Phillips

Research Collection School Of Economics

A system of multivariate semiparametric nonlinear time series models is studied with possible dependence structures and nonstationarities in the parametric and nonparametric components. The parametric regressors may be endogenous while the nonparametric regressors are assumed to be strictly exogenous. The parametric regressors may be stationary or nonstationary and the nonparametric regressors are nonstationary integrated time series. Semiparametric least squares (SLS) estimation is considered and its asymptotic properties are derived. Due to endogeneity in the parametric regressors, SLS is not consistent for the parametric component and a semiparametric instrumental variable (SIV) method is proposed instead. Under certain regularity conditions, the SIV …

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Evaluating The Effectiveness Of Cooling Measures On Property Prices: An Exploration Of Alternative Econometric Techniques, Kuo Chuen Lee, Sock Yong Phang, Kok Fai Phoon, Karol Wee Aug 2013

Evaluating The Effectiveness Of Cooling Measures On Property Prices: An Exploration Of Alternative Econometric Techniques, Kuo Chuen Lee, Sock Yong Phang, Kok Fai Phoon, Karol Wee

Research Collection Lee Kong Chian School Of Business

No abstract provided.

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Contract Enforcement: A Political Economy Model Of Legal Development, Fali Huang Aug 2013

Contract Enforcement: A Political Economy Model Of Legal Development, Fali Huang

Research Collection School Of Economics

In an effort to understand why the relative usage of relational and legal contracts differs across societies, this article builds a political economy model of legal development where legal quality of contract enforcement is a costly public good. It finds that legal investment tends to be too small under elite rule but too large under majority rule in comparison with the socially optimal level. Furthermore, elite rule, low legal quality, and high-income inequality may form a self-perpetuating circle that hinders economic development. In contrast to the conventional view, this article suggests that the often-observed association between heavy reliance on relational …

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Testing For Multiple Bubbles 2: Limit Theory Of Real Time Detectors, Peter C. B. Phillips, Shu-Ping Shi, Jun Yu Aug 2013

Testing For Multiple Bubbles 2: Limit Theory Of Real Time Detectors, Peter C. B. Phillips, Shu-Ping Shi, Jun Yu

Research Collection School Of Economics

This paper provides the limit theory of real time dating algorithms for bubble detection that were suggested in Phillips, Wu and Yu (2011, PWY) and Phillips, Shi and Yu (2013b, PSY). Bubbles are modeled using mildly explosive bubble episodes that are embedded within longer periods where the data evolves as a stochastic trend, thereby capturing normal market behavior as well as exuberance and collapse. Both the PWY and PSY estimates rely on recursive right tailed unit root tests (each with a di§erent recursive algorithm) that may be used in real time to locate the origination and collapse dates of bubbles. …

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Testing For Multiple Bubbles 1: Historical Episodes Of Exuberance And Collapse In The S&P 500, Peter C. B. Phillips, Shu-Ping Shi, Jun Yu Aug 2013

Testing For Multiple Bubbles 1: Historical Episodes Of Exuberance And Collapse In The S&P 500, Peter C. B. Phillips, Shu-Ping Shi, Jun Yu

Research Collection School Of Economics

Recent work on econometric detection mechanisms has shown the effectiveness of recursive procedures in identifying and dating financial bubbles. These procedures are useful as warning alerts in surveillance strategies conducted by central banks and fiscal regulators with real time data. Use of these methods over long historical periods presents a more serious econometric challenge due to the complexity of the nonlinear structure and break mechanisms that are inherent in multiple bubble phenomena within the same sample period. To meet this challenge the present paper develops a new recursive flexible window method that is better suited for practical implementation with long …

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Housing Policies In Singapore: Evaluation Of Recent Proposals And Recommendations For Reform, Sock Yong Phang, David Kuo Chuen Lee, Alan Cheong, Kok Fai Phoon, Karol Wee Aug 2013

Housing Policies In Singapore: Evaluation Of Recent Proposals And Recommendations For Reform, Sock Yong Phang, David Kuo Chuen Lee, Alan Cheong, Kok Fai Phoon, Karol Wee

Research Collection School Of Economics

The Singapore housing market is unusual in its high homeownership rate, the dominance of HDB housing, and the extensive intervention of the government in regulating housing supply and demand in both the HDB and private housing sectors. Recent rapid population increases in a low interest rate and high global liquidity environment has resulted in accelerated house prices increases in Singapore. Earlier this year, the government launched “Our Singapore Conversation” of which discussion on housing policies constitutes one major component. This “conversation” comes in the wake of several consecutive rounds of measures to stabilize housing prices using various instruments. This paper …

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Growing The Asset Management Franchise: Evidence From Hedge Fund Firms, William Fung, David Hsieh, Narayan Y. Naik, Melvyn Teo Aug 2013

Growing The Asset Management Franchise: Evidence From Hedge Fund Firms, William Fung, David Hsieh, Narayan Y. Naik, Melvyn Teo

Research Collection Lee Kong Chian School Of Business

We investigate the growth strategies of hedge fund firms. We find that firms with successful first funds are able to launch follow-on funds that charge higher performance fees, set more onerous redemption terms, and attract greater inflows. While first funds outperform follow-on funds, the superior performance of the former attenuates following the launch of the second fund. Multiple-product firms underperform single-product firms, but harvest greater fee revenues. Consequently, the multiple-product firm has become the dominant business model in the hedge fund industry.

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Trial And Error In Influential Social Networks, Xiaohui Bei, Ning Chen, Liyu Dou, Xiangru Huang, Ruixin Qiang Aug 2013

Trial And Error In Influential Social Networks, Xiaohui Bei, Ning Chen, Liyu Dou, Xiangru Huang, Ruixin Qiang

Research Collection School Of Economics

In this paper, we introduce a trial-And-error model to study information diffusion in a social network. Specifically, in every discrete period, all individuals in the network concurrently try a new technology or product with certain respective probabilities. If it turns out that an individual observes a better utility, he will then adopt the trial; otherwise, the individual continues to choose his prior selection. We first demonstrate that the trial and error behavior of individuals characterizes certain global community structures of a social network, from which we are able to detect macro-communities through the observation of microbehavior of individuals. We run …

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Volatility Occupation Times, Jia Li, Viktor Todorov, George Tauchen Aug 2013

Volatility Occupation Times, Jia Li, Viktor Todorov, George Tauchen

Research Collection School Of Economics

We propose nonparametric estimators of the occupation measure and the occupation density of the diffusion coefficient (stochastic volatility) of a discretely observed Itô semimartingale on a fixed interval when the mesh of the observation grid shrinks to zero asymptotically. In a first step we estimate the volatility locally over blocks of shrinking length, and then in a second step we use these estimates to construct a sample analogue of the volatility occupation time and a kernel-based estimator of its density. We prove the consistency of our estimators and further derive bounds for their rates of convergence. We use these results …

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Improving Housing Status Quo, Sock Yong Phang, David K. C. Lee Aug 2013

Improving Housing Status Quo, Sock Yong Phang, David K. C. Lee

Research Collection Lee Kong Chian School Of Business

On home ownership and upgrading, PM Lee Hsien Loong has reaffirmed the Government's objective to make home ownership more affordable for all first-time buyers, especially low-income earners, through increasing the amounts of targeted housing grant subsidies. He spelt out the desired outcomes of housing affordability policy through his detailed matching of Housing Board flat type with household incomes.

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Inconsistent Var Regression With Common Explosive Roots, Peter C. B. Phillips, Tassos Magdalinos Aug 2013

Inconsistent Var Regression With Common Explosive Roots, Peter C. B. Phillips, Tassos Magdalinos

Research Collection School Of Economics

Nielsen (Working paper, University of Oxford, 2009) shows that vector autoregression is inconsistent when there are common explosive roots with geometric multiplicity greater than unity. This paper discusses that result, provides a coexplosive system extension and an illustrative example that helps to explain the finding, gives a consistent instrumental variable procedure, and reports some simulations. Some exact limit distribution theory is derived and a useful new reverse martingale central limit theorem is proved.

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Economic Indices: Managing By The Numbers, Singapore Management University Jul 2013

Economic Indices: Managing By The Numbers, Singapore Management University

Perspectives@SMU

Understanding indices is not just about crunching numbers, but appreciating how it is constructed

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On The Effect And Remedies Of Shrinkage On Classification Probability Estimation, Zhengxiao Wu, Yufeng Liu, Zhengxiao Wu Jul 2013

On The Effect And Remedies Of Shrinkage On Classification Probability Estimation, Zhengxiao Wu, Yufeng Liu, Zhengxiao Wu

Research Collection School of Economics

Shrinkage methods have been shown to be effective for classification problems. As a form of regularization, shrinkage through penalization helps to avoid overfitting and produces accurate classifiers for prediction, especially when the dimension is relatively high. Despite the benefit of shrinkage on classification accuracy of resulting classifiers, in this article, we demonstrate that shrinkage creates biases on classification probability estimation. In many cases, this bias can be large and consequently yield poor class probability estimation when the sample size is small or moderate. We offer some theoretical insights into the effect of shrinkage and provide remedies for better class probability …

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Is The Renminbi East Asia’S Dominant Reference Currency? A Reconsideration, Hwee Kwan Chow Jul 2013

Is The Renminbi East Asia’S Dominant Reference Currency? A Reconsideration, Hwee Kwan Chow

Research Collection School Of Economics

Recent empirical studies show that the Chinese currency renminbi is either becoming or has become a dominant reference currency in East Asia. This paper reviews the evidence with daily exchange rate data from seven East Asian economies namely, Indonesia, Korea, Malaysia, the Philippines, Singapore, Thailand and Taiwan. We consider the likely problems and pitfalls associated with the application of Frankel-Wei regressions to determine the weights of the US dollar and the renminbi in the implicit currency baskets. We show empirically the estimation of currency weights using non-orthogonalised renminbi movements could suffer from imprecision and/or inconsistency. To circumvent the simultaneity bias …

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Policy Responses In An Unstable Globalized Economy: Multi-Stressed Low-Earning Families In Singapore, Irene Y. H. Ng, Kong Weng Ho Jul 2013

Policy Responses In An Unstable Globalized Economy: Multi-Stressed Low-Earning Families In Singapore, Irene Y. H. Ng, Kong Weng Ho

Research Collection School Of Economics

The Singapore government responded swiftly to the 2008 global recession, doling out a range of policies in aid of all levels of wage earners. This paper explores the impacts of economic trends and government policies on low-wage earners. Using a theoretical model and empirical data from a pilot study of recipients of a government Work Support Program, it demonstrates the effects of socioeconomic factors on multi-stressed low-earning families. It discusses the adequacy of current policies in addressing the multiple stressors experienced by low-wage earners.

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Forecasting Government Bond Risk Premia Using Technical Indicators, Jeremy Goh, Fuwei Jiang, Jun Tu, Guofu Zhou Jul 2013

Forecasting Government Bond Risk Premia Using Technical Indicators, Jeremy Goh, Fuwei Jiang, Jun Tu, Guofu Zhou

Research Collection Lee Kong Chian School Of Business

While economic variables have been used extensively to forecast bond risk premia, little attention has been paid to technical indicators which are widely used by practitioners. In this paper, we study the predictive ability of a variety of technical indicators vis-a-vis the economic variables. We find that technical indicators have significant in both in- and out-of-sample forecasting power. Moreover, we find that using information from both technical indicators and economic variables increases the forecasting performance substantially. We also find that the economic value of bond risk premia forecasts from our methodology is comparable to that of equity risk premium forecasts.

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Robust Estimation And Inference For Jumps In Noisy High Frequency Data: A Local-To-Continuity Theory For The Pre-Averaging Method, Jia Li Jul 2013

Robust Estimation And Inference For Jumps In Noisy High Frequency Data: A Local-To-Continuity Theory For The Pre-Averaging Method, Jia Li

Research Collection School Of Economics

We develop an asymptotic theory for the pre-averaging estimator when asset price jumps are weakly identified, here modeled as local to zero. The theory unifies the conventional asymptotic theory for continuous and discontinuous semimartingales as two polar cases with a continuum of local asymptotics, and explains the breakdown of the conventional procedures under weak identification. We propose simple bias-corrected estimators for jump power variations, and construct robust confidence sets with valid asymptotic size in a uniform sense. The method is also robust to certain forms of microstructure noise.

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Allocative Efficiency, Mark-Ups, And The Welfare Gains From Trade, Thomas J. Holmes, Wen-Tai Hsu, Sanghoon Lee Jul 2013

Allocative Efficiency, Mark-Ups, And The Welfare Gains From Trade, Thomas J. Holmes, Wen-Tai Hsu, Sanghoon Lee

Research Collection School Of Economics

This paper develops an index of allocative efficiency that depends upon the distribution of mark-ups across goods and is separable from an index of standard Ricardian gains from trade. It determines how changes in trade frictions affect allocative efficiency in an oligopoly model of international trade, decomposing the effect into the cost-change channel and the price-change channel. Formulas are derived shedding light on the signs and magnitudes of the two channels. In symmetric country models, trade tends to increase allocative efficiency through the cost-change channel, yielding a welfare benefit beyond productive efficiency gains. In contrast, the price-change channel has ambiguous …

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The Consequences Of A Public Health Insurance Option: Evidence From Medicare Part D Prescription Drug Markets, Daniel P. Miller, Jungwon Yeo Jul 2013

The Consequences Of A Public Health Insurance Option: Evidence From Medicare Part D Prescription Drug Markets, Daniel P. Miller, Jungwon Yeo

Research Collection School Of Economics

This paper examines a public option competing alongside private insurers in Medicare Part D. We estimate a random coefficient demand system and oligopoly supply-side model with endogenous premium subsidies and risk adjustment payments. If the public option does not affect health risk sorting, counterfactual results show modest competitive benefits. However, increased subsidy payments eliminate welfare gains regardless of the public option's cost position. If the public option adversely selects -- facilitating insurers' ability to cream-skim favorable risk -- the risk adjustment mechanism creates a downward pricing distortion, amplifying competitive benefits. Despite greater selection, total surplus may increase, but the division …

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