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Research Collection School Of Economics

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Full-Text Articles in Economics

Gambling On Genes: Ambiguity Aversion Explains Investment In Sisters' Children, Brishti Guha Sep 2012

Gambling On Genes: Ambiguity Aversion Explains Investment In Sisters' Children, Brishti Guha

Research Collection School Of Economics

Many men invest in their sisters’ children instead of their wives’. Existing theories addressing such behavior depend on the level of paternity probability in such men’s societies being implausibly low. I link this anthropologically observed investment behavior with the experimentally observed phenomenon that some individuals are ambiguity averse. Arguing that men’s decisions are made under ambiguity, I show that an increase in ambiguity aversion results in investment in sisters’, rather than wives’, children. I show that this can happen even under risk neutrality. I also consider the special cases of a SEU maximizer and of extreme ambiguity aversion in the …


The Educated Middle Class, Their Economics Prospects, And The Arab Spring, Davin Chor, Filipe R. Campante Sep 2012

The Educated Middle Class, Their Economics Prospects, And The Arab Spring, Davin Chor, Filipe R. Campante

Research Collection School Of Economics

The recent uprisings in the Arab World carry a broader lesson, highlighting the importance of sustaining an economy that provides sufficient job opportunities for an increasingly educated and skilled middle class.


Central Place Theory And City Size Distribution, Wen-Tai Hsu Sep 2012

Central Place Theory And City Size Distribution, Wen-Tai Hsu

Research Collection School Of Economics

This paper proposes a theory of city size distribution via a hierarchy approach rather than the popular random growth process. It does so by formalizing central place theory using an equilibrium entry model and specifying the conditions under which city size distribution follows a power law. Central place theory describes the way in which a hierarchical city system with different layers of cities serving differently sized market areas is formed from a uniformly populated space. The force driving the city size differences in this model is the heterogeneity in economies of scale across goods. The city size distribution under a …


Economy Can Be Game Changer For The Region, Kim Song Tan, Sim Yee Lau Sep 2012

Economy Can Be Game Changer For The Region, Kim Song Tan, Sim Yee Lau

Research Collection School Of Economics

this article they explore reform of the banking sector in Myanmar.


Detecting Bubbles In Hong Kong Residential Property Market, Matthew S. Yiu, Jun Yu, Lu Jin Aug 2012

Detecting Bubbles In Hong Kong Residential Property Market, Matthew S. Yiu, Jun Yu, Lu Jin

Research Collection School Of Economics

This study uses a newly developed bubble detection method (Phillips, Shi and Yu, 2011) to identify real estate bubbles in the Hong Kong residential property market. Our empirical results reveal several positive bubbles in the Hong Kong residential property market, including one in 1995, a stronger one in 1997, another one in 2004, and a more recent one in 2008. In addition, the method identifies two negative bubbles in the data, one in 2000 and the other one in 2001. These empirical results continue to be valid for the mass segment and the luxury segment. However, the method finds a …


Robust Deviance Information Criterion For Latent Variable Models, Yong Li, Tao Zeng, Jun Yu Aug 2012

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

Research Collection School Of Economics

It is shown in this paper that the data augmentation technique undermines the theoretical underpinnings of the deviance information criterion (DIC), a widely used information criterion for Bayesian model comparison, although it facilitates parameter estimation for latent variable models via Markov chain Monte Carlo (MCMC) simulation. Data augmentation makes the likelihood function non-regular and hence invalidates the standard asymptotic arguments. A new information criterion, robust DIC (RDIC), is proposed for Bayesian comparison of latent variable models. RDIC is shown to be a good approximation to DIC without data augmentation. While the later quantity is difficult to compute, the expectation { …


Recent Advances In Nonstationary Time Series: A Festschrift In Honor Of Peter C. B. Phillips, Robert S. Mariano, Zhijie Xiao, Jun Yu Aug 2012

Recent Advances In Nonstationary Time Series: A Festschrift In Honor Of Peter C. B. Phillips, Robert S. Mariano, Zhijie Xiao, Jun Yu

Research Collection School Of Economics

On July 14–15, 2008, the School of Economics and the Sim Kee Boon Institute for Financial Economics at Singapore Management University (SMU) co-hosted a conference honoring the contribution of Peter Phillips to econometrics and statistics, in celebration of his 60th birthday. In total, 51 papers were presented by his colleagues and former students, who deeply appreciate and respect Peter as a true scholar and a good friend. These papers mainly cover two areas of Peter’s current research interests—nonstationary time series analysis, and panel, nonlinear and nonparametric models. On the basis of this conference, we have taken the opportunity to edit …


Mean And Autocovariance Function Estimation Near The Boundary Of Stationarity, Liudas Giraitis, Peter C. B. Phillips Aug 2012

Mean And Autocovariance Function Estimation Near The Boundary Of Stationarity, Liudas Giraitis, Peter C. B. Phillips

Research Collection School Of Economics

We analyze the applicability of standard normal asymptotic theory for linear process models near the boundary of stationarity. Limit results are given for estimation of the mean, autocovariance and autocorrelation functions within the broad region of stationarity that includes near boundary cases which vary with the sample size. The rate of consistency and the validity of the normal asymptotic approximation for the corresponding estimators is determined both by the sample size n and a parameter measuring the proximity of the model to the unit root boundary. (C) 2012 Elsevier B.V. All rights reserved.


Optimal Estimation Under Nonstandard Conditions, Werner Ploberger, Peter C. B. Phillips Aug 2012

Optimal Estimation Under Nonstandard Conditions, Werner Ploberger, Peter C. B. Phillips

Research Collection School Of Economics

We analyze optimality properties of maximum likelihood (ML) and other estimators when the problem does not necessarily fall within the locally asymptotically normal (LAN) class, therefore covering cases that are excluded from conventional LAN theory such as unit root nonstationary time series. The classical Hajek-Le Cam optimality theory is adapted to cover this situation. We show that the expectation of certain monotone "bowl-shaped" functions of the squared estimation error are minimized by the ML estimator in locally asymptotically quadratic situations, which often occur in nonstationary time series analysis when the LAN property fails. Moreover, we demonstrate a direct connection between …


Bias In The Estimation Of The Mean Reversion Parameter In Continuous Time Models, Jun Yu Jul 2012

Bias In The Estimation Of The Mean Reversion Parameter In Continuous Time Models, Jun Yu

Research Collection School Of Economics

It is well known that for continuous time models with a linear drift standard estimation methods yield biased estimators for the mean reversion parameter both in finite discrete samples and in large in-fill samples. In this paper, we obtain two expressions to approximate the bias of the least squares/maximum likelihood estimator of the mean reversion parameter in the Ornstein-Uhlenbeck process with a known long run mean when discretely sampled data are available. The first expression mimics the bias formula of Marriott and Pope (1954) for the discrete time model. Simulations show that this expression does not work satisfactorily when the …


Country Image And International Trade, Pao Li Chang, Tomoki Fujii Jul 2012

Country Image And International Trade, Pao Li Chang, Tomoki Fujii

Research Collection School Of Economics

We study the impact of country image on international trade flows. We find that a one percentage point increase in the positive response ratio - the proportion of people in the importing country who view the exporting country positively - is associated with at least a one percent increase in the aggregate trade flow. By disaggregating trade flows by the type of goods, we also find that both homogeneous and differentiated goods are positively affected by better country image and that the impact of country image tends to be larger when more substitutes are available in the international market.


Why Smes Should Aim At Becoming Exporters, Hian Teck Hoon Jul 2012

Why Smes Should Aim At Becoming Exporters, Hian Teck Hoon

Research Collection School Of Economics

In the fortnightly series entitled 'Engage SMU profs', Professor Hoon Hian Teck, Associate Dean of the School of Economics, answers the questions: Should SMEs aim to become exporters rather than serve only the domestic market? What are the benefits to SMEs in doing so? Does the smallness in size limit their productivity growth? Are there any channels for SMEs to get assistance from the authorities, and what are these? He commented that if more of our local SMEs look towards the international marketplace and sell to foreign markets, not only will Singapore's GDP be boosted, local businessmen will also get …


Growth And Inequality In Singapore, Kong Weng Ho Jul 2012

Growth And Inequality In Singapore, Kong Weng Ho

Research Collection School Of Economics

While the strategy of openness had earned Singapore rapid economic growth, upward social mobility, and possibly decreasing inequality in the early years of development, the more recent years saw increasing inequality and with it an underlying possibly diminished upward intergenerational mobility due to skill-biased growth processes, skill-biased parental influence, liberalization in the education industry, and structural changes in the society which hurt the human capital accumulation of children in families under economic and intra-household stresses. In particular, the paternal influence on educational aspiration and attainment is more pronounced than the mother’s. Non-Chinese and youths from disrupted families are worse off …


Statistical Tests For Multiple Forecast Comparison, Roberto Mariano, Daniel P. A. Preve Jul 2012

Statistical Tests For Multiple Forecast Comparison, Roberto Mariano, Daniel P. A. Preve

Research Collection School Of Economics

We consider a multivariate version of the Diebold–Mariano test for equal predictive ability of three or more forecasting models. The Wald-type test, S, which has a null distribution that is asymptotically chi-squared, is shown to be generally invariant with respect to the ordering of the models being compared. Finite-sample corrections for the test are also developed. Monte Carlo simulations indicate that S has reasonable size properties in large samples but tends to be oversized in moderate samples. The finite-sample correction succeeds in correcting for size, but only partially. For the size-adjusted tests, power increases with sample size, as expected. It …


Inefficiency In The Shadow Of Unobservable Outside Options, Madhav S. Aney Jul 2012

Inefficiency In The Shadow Of Unobservable Outside Options, Madhav S. Aney

Research Collection School Of Economics

This paper considers the problem of allocating an object between two players in an environment with one sided asymmetric information when their outside options depend on each other's type, causing the outside option of the uninformed player to be unobservable to her. Consequently efficient mechanisms under budget balance are not always available even when there is no uncertainty about which of the two players values the object more. A simple condition on the outside options turns out to be both necessary and sufficient to guarantee the first best. I also characterise the second best allocation under some conditions and show …


Sieve Estimation Of Panel Data Models With Cross Section Dependence, Liangjun Su, Sainan Jin Jul 2012

Sieve Estimation Of Panel Data Models With Cross Section Dependence, Liangjun Su, Sainan Jin

Research Collection School Of Economics

In this paper we consider the problem of estimating semiparametric panel data models with cross section dependence, where the individual-specific regressors enter the model nonparametrically whereas the common factors enter the model linearly. We consider both heterogeneous and homogeneous regression relationships when both the time and cross-section dimensions are large. We propose sieve estimators for the nonparametric regression functions by extending Pesaran’s (2006) common correlated effect (CCE) estimator to our semiparametric framework. Asymptotic normal distributions for the proposed estimators are derived and asymptotic variance estimators are provided. Monte Carlo simulations indicate that our estimators perform well in finite samples.


Crime And Moral Hazard: Does More Policing Necessarily Induce Private Negligence?, Brishti Guha, Ashok S. Guha Jun 2012

Crime And Moral Hazard: Does More Policing Necessarily Induce Private Negligence?, Brishti Guha, Ashok S. Guha

Research Collection School Of Economics

Even risk-neutral individuals can insure themselves against crimes by combining direct expenditure on security with costly diversification. In such cases — and even when one of these options is infeasible — greater policing often actually encourages private precautions.


Testing For Jumps In Noisy High Frequency Data, Yacine Ait-Sahalia, Jean Jacod, Jia Li Jun 2012

Testing For Jumps In Noisy High Frequency Data, Yacine Ait-Sahalia, Jean Jacod, Jia Li

Research Collection School Of Economics

This paper proposes a robustification of the test statistic of Aït-Sahalia and Jacod (2009b) for the presence of market microstructure noise in high frequency data, based on the pre-averaging method of Jacod et al. (2010). We show that the robustified statistic restores the test's discriminating power between jumps and no jumps despite the presence of market microstructure noise in the data.


Crime And Moral Hazard: Does More Policing Necessarily Induce Private Negligence?, Brishti Guha, Ashok S. Guha Jun 2012

Crime And Moral Hazard: Does More Policing Necessarily Induce Private Negligence?, Brishti Guha, Ashok S. Guha

Research Collection School Of Economics

Even risk-neutral individuals can insure themselves against crimes by combining direct expenditure on security with costly diversification. In such cases — and even when one of these options is infeasible — greater policing often actually encourages private precautions.


Random Dictatorship Domains, Shurojit Chatterji, Arunava Sen, Huaxia Zeng Jun 2012

Random Dictatorship Domains, Shurojit Chatterji, Arunava Sen, Huaxia Zeng

Research Collection School Of Economics

A domain of preference orderings is a random dictatorship domain if every strategy- proof random social choice function satisfying unanimity defined on the domain, is a random dictatorship. Gibbard (1977) showed that the universal domain is a random dictatorship domain. We investigate the relationship between dictatorial and random dictatorship domains. We show that there exist dictatorial domains that are not random dictatorship domains. We provide stronger versions of the linked domain condition (introduced in Aswal et al. (2003)) that guarantee that a domain is a random dictatorship domain. A key step in these arguments that is of independent interest, is …


Dynamic Misspecification In Nonparametric Cointegrating Regression, Ioannis Kasparis, Peter C. B. Phillips Jun 2012

Dynamic Misspecification In Nonparametric Cointegrating Regression, Ioannis Kasparis, Peter C. B. Phillips

Research Collection School Of Economics

Linear cointegration is known to have the important property of invariance under temporal translation. The same property is shown not to apply for nonlinear cointegration. The limit properties of the Nadaraya-Watson (NW) estimator for cointegrating regression under misspecified lag structure are derived, showing the NW estimator to be inconsistent, in general, with a "pseudo-true function" limit that is a local average of the true regression function. In this respect nonlinear cointegrating regression differs importantly from conventional linear cointegration which is invariant to time translation. When centred on the pseudo-true function and appropriately scaled, the NW estimator still has a mixed …


Nonlinear Cointegrating Regression Under Weak Identification, Xiaoxia Shi, Peter C. B. Phillips Jun 2012

Nonlinear Cointegrating Regression Under Weak Identification, Xiaoxia Shi, Peter C. B. Phillips

Research Collection School Of Economics

An asymptotic theory is developed for a weakly identified cointegrating regression model in which the regressor is a nonlinear transformation of an integrated process. Weak identification arises from the presence of a loading coefficient for the nonlinear function that may be close to zero. In that case, standard nonlinear cointegrating limit theory does not provide good approximations to the finite-sample distributions of nonlinear least squares estimators, resulting in potentially misleading inference. A new local limit theory is developed that approximates the finite-sample distributions of the estimators uniformly well irrespective of the strength of the identification. An important technical component of …


An Economic Analysis Of Optimum Population Size Achieved Through Boosting Total Fertility And Net Immigration, Hian Teck Hoon May 2012

An Economic Analysis Of Optimum Population Size Achieved Through Boosting Total Fertility And Net Immigration, Hian Teck Hoon

Research Collection School Of Economics

Without net immigration, the population size is projected to decline from 2025 onward. Does it matter? To answer this question, the paper proceeds in two main parts. In the first part, taking a citizen's utility as a measure of welfare, we identify the channels through which a larger population size reduces welfare, on the one hand, and increases welfare on the other hand. The optimum population size is achieved when the net resultant effect of all these channels leaves citizens' welfare at the maximum. When current and projected total fertility rates without net immigration lead to a projected path of …


Out Of Sight, Out Of Mind: The Value Of Political Connections In Social Networks, Quoc-Anh Do, Yen Teik Lee, Bang Dang Nguyen, Kieu-Trang Nguyen May 2012

Out Of Sight, Out Of Mind: The Value Of Political Connections In Social Networks, Quoc-Anh Do, Yen Teik Lee, Bang Dang Nguyen, Kieu-Trang Nguyen

Research Collection School Of Economics

This paper investigates the impact of social-network based political connections on firm value. We focus on the networks of university classmates and alumni among directors of U.S. public firms and congressmen. Comparing firms connected to elected versus defeated politicians in the Regression Discontinuity Design of close elections from 2000 to 2008, we provide evidence that political connections enhance firm value. However, the value of political connections varies in a more complex way than expected. While connections to powerful members of the Senate generate strong positive impact on firm value, connections to newly elected congressmen are less valuable to firms than …


Measuring The Upstreamness Of Production And Trade Flows, Pol Antras, Davin Chor, Thibault Fally, Russell Hillbery May 2012

Measuring The Upstreamness Of Production And Trade Flows, Pol Antras, Davin Chor, Thibault Fally, Russell Hillbery

Research Collection School Of Economics

We propose two distinct approaches to the measurement of industry upstreamness (or average distance from final use) and show that they yield an equivalent measure. Furthermore, we provide two additional interpretations of this measure, one of them related to the concept of forward linkages. We construct this measure for 426 industries using the 2002 US input-output Tables. We also construct our measure using data from selected countries in the OECD STAN database. Finally, we present an application of our measure that explores the determinants of the average upstreamness of exports at the country level using trade flows for 2002.


Changing Unchanged Inequality: Higher Education, Youth Population, And The Japanese Seniority Wage System, Ken Yamada, Daiji Kawaguchi May 2012

Changing Unchanged Inequality: Higher Education, Youth Population, And The Japanese Seniority Wage System, Ken Yamada, Daiji Kawaguchi

Research Collection School Of Economics

Wage inequality declined in the 1990s and rose after 2000 among full-time male workers in Japan. Narrowing wage inequality in the 1990s can be accounted for by a decline in between-group inequality resulting from a stable return to education and decreased returns to experience and tenure. Widening wage inequality after 2000 can be accounted for by a rise in within-group inequality resulting from a relative increase in educated and experienced workers, as well as changes in heterogeneous returns to human capital.


Off The Cliff And Back? Credit Conditions And International Trade During The Global Financial Crisis, Davin Chor, Manova Kalina May 2012

Off The Cliff And Back? Credit Conditions And International Trade During The Global Financial Crisis, Davin Chor, Manova Kalina

Research Collection School Of Economics

We examine the collapse of international trade flows during the 2008-2009 global financial crisis using detailed data on the evolution of monthly U.S. imports over the November 2006 - April 2009 period. We show that credit constraints and the reduction in the availability of external capital were an important channel through which the crisis affected trade volumes. We identify the effects of credit tightening by exploiting the variation in the cost of capital across countries and over time, as well as the variation in financial dependence across sectors. We find that countries with higher interbank interest rates and thus tighter …


Wage-Vacancy Contracts And Coordination Frictions, Nicolas L. Jacquet, Serene Tan May 2012

Wage-Vacancy Contracts And Coordination Frictions, Nicolas L. Jacquet, Serene Tan

Research Collection School Of Economics

We consider a directed search model with risk-averse workers and risk-neutral entrepreneurs who can set up firms that post wage-vacancy contracts, i.e., contracts where firms can make payments to more than one applicant, and where the payments can be different for each applicant and be contingent on the number of applicants. We establish that the type of contracts the literature focuses on are not offered if firms can post wage-vacancy contracts. We show that there exists an equilibrium satisfying a Monotonic Expected Utility property which is efficient. Furthermore, we investigate the role of wage-vacancy contracts on welfare and competition.


Love And Money By Parental Match-Making: Evidence From Urban Couples In China, Fali Huang, Ginger Jin, Lixin Collin Xu May 2012

Love And Money By Parental Match-Making: Evidence From Urban Couples In China, Fali Huang, Ginger Jin, Lixin Collin Xu

Research Collection School Of Economics

Parental involvement in marriage matchmaking may distort the optimal spouse choice because parents are willing to substitute love for money. The rationale is that the joint income of married children can be shared among extended family members more easily than mutual attraction felt by the couple themselves, and as a result, the best spouse candidate in the parents' eyes can differ from what is optimal to the individual, even though parents are altruistic and care dearly about their children's welfare. We find supporting evidence for this prediction using a unique sample of urban couples in China in the early 1990s.


Organizing The Global Value Chain, Pol Antras, Davin Chor May 2012

Organizing The Global Value Chain, Pol Antras, Davin Chor

Research Collection School Of Economics

We develop a property-rights model of the firm in which production entails a continuum of uniquely sequenced stages. In each stage, a final-good producer contracts with a distinct supplier for the procurement of a customized stage-specific component. Our model yields a sharp characterization for the optimal allocation of ownership rights along the value chain. We show that the incentive to integrate suppliers varies systematically with the relative position (upstream versus downstream) at which the supplier enters the production line. Furthermore, the nature of the relationship between integration and “downstreamness” depends crucially on the elasticity of demand faced by the final-good …