Rainer Winkelmann, Neglected heterogeneity, Simpson’s paradox, and the anatomy of least squares, In: Working paper series / Department of Economics, No. 426, 2023. (Working Paper)
When a sample combines data from two or more groups, multivariate regression yields a matrix-weighted average of the group-specific coefficient vectors. However, it is possible that the weighted average of a specific coefficient falls outside the range of the group-specific coefficients, and it may even have a different sign compared to both group-level coefficients, a manifestation of Simpson's paradox. The result of the combined regression is then prone to misinterpretation. The purpose of this paper is to raise awareness of this problem and to state conditions under which such non-convex weighting or sign reversal can arise, for a model with two regressors and two groups. Two illustrative examples, an investment equation estimated with panel data, and a cross-sectional earnings equation for men and women, highlight the relevance of these findings for applied work. |
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Finkelfarb Lichand Guilherme Lichand, Maria Eduarda Perpétuo, Priscila Soares, An education inequity index, In: SSRN, No. 4250539, 2022. (Working Paper)
One of the leading reasons behind social inequities is that elite groups have had access to more widespread and higher-quality educational opportunities much earlier, often when their economic returns were much higher. Nevertheless, measures of educational inequalities tend to focus exclusively on current differences within the school-age population. This paper proposes a new measure – the education inequity index (EII) – that captures cumulative differences in access to the economic returns of education across different groups. Concretely, the EII is the share of the cumulative wage premium appropriated by the elite over time in excess to that accrued by other groups. The paper advances a methodology to compute different versions of the EII using national household survey data. We then illustrate its applications by computing the economic, racial and gender EII for Brazil since 1980, separately for primary, secondary and college education. We showcase the new insights that the EII brings relative to other measures when it comes to monitoring inequities and informing policies to address them. |
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Michelle Acampora, Lorenzo Casaburi, Jack Willis, Land rental markets: experimental evidence from Kenya, In: NBER Working Paper Series, No. 30495, 2023. (Working Paper)
Do land market frictions cause misallocation in agriculture? In a field experiment in Western Kenya, we randomly subsidize owners to rent out land. Transferring cultivation rights to renters increases output and value added on the plots, consistent with imperfect land markets and misallocation, and induced rentals persist after the subsidy ends. Additional analysis provides insights on the magnitude and nature of land frictions - which include search, risks, and learning - and on the sources of gains from trade - which include differences between owners and renters in crop choices, productivity, and financial market constraints, but not in labor constraints. |
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Kaspar Villiger, Politik und Wissenschaft: von der Holpflicht der Politik und der Bringpflicht der Wissenschaft, In: UBS Center Public Paper Series, No. 11, 2022. (Working Paper)
Ziel der Politik muss es sein, den Menschen ein Leben in Würde und Wohlstand zu ermöglichen. Wissenschaft ist unerlässlich, um dieses Ziel zu erreichen. Aber sie kann den für die Politik zuständigen Personen ihre Verantwortung nicht abnehmen, denn Politik muss neben dem wissenschaftlich Optimalen auch andere Aspekte berücksichtigen wie politische Durchsetzbarkeit, Kosten, Referendumsrisiken oder Vereinbarkeit mit internationalen Verträgen. Wissenschaft erweitert unser Wissen mittels transparenter und überprüfbarer Verfahren. Sie ist ein nie endender Prozess der Suche nach Wahrheit. Oft sind Wissenschaftler in zentralen Fragen dabei auch (noch) uneinig. Das alles eröffnet der Politik auch Missbrauchsmöglichkeiten: Bei Uneinigkeit sucht man den Experten, dessen Meinung gerade passt, man lässt Gefälligkeitsgutachten erstellen, oder man beauftragt Experten bewusst mit der Suche nach Argumenten, die die eigenen Vorurteile bestätigen, usw. Das alles ändert aber nichts daran, dass die Politik zur Bewältigung der Komplexität der modernen Welt wissenschaftsbasiertes Fachwissen benötigt. Da der Staat nicht umfassend über solches Fachwissen verfügen kann, muss er das in Wirtschaft, Hochschulen und Zivilgesellschaft reichlich vorhandene Wissen auf geeignete Weise nutzen. Politik nutzt die Wissenschaft tendenziell eher zu wenig, häufig auch wegen eines gewissen Besserwissertums. Es darf von der Wissenschaft aber auch erwartet werden, dass sie Erkenntnisse zu gewinnen sucht, die politische Probleme praktisch lösen helfen. Die Wissenschaft hat eine Bringpflicht, die Politik eine Holpflicht. |
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Helmut Max Dietl, Markus Lang, Johannes Orlowski, Philipp Wegelin, The Effect of the Initial Distribution of Labor-Related Property Rights on the Allocative Efficiency of Labor Markets, In: UZH Business Working Paper Series, No. 398, 2023. (Working Paper)
We conduct an empirical study to examine the impact of the initial distribution of labor-related property rights on the allocative efficiency of labor markets for skilled workers in a highly competitive labor market (professional basketball). Specifically, we compare a regime where employers can trade workers to other employers without the worker's consent to one where workers have the right to negotiate freely with other employers and move without their employer's consent. Our results indicate that contrary to the predictions of the Coase Theorem, allocative efficiency decreases when workers have the initial right to negotiate freely and move to another employer. |
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Pascal Flurin Meier, Raphael Flepp, Egon Franck, Are Expectations Misled by Chance? Quasi-Experimental Evidence from Financial Analysts, In: UZH Business Working Paper Series, No. 396, 2022. (Working Paper)
We examine whether finance professionals deviate from Bayes’ theorem on the processing of nondiagnostic information when forecasting quarterly earnings. Using field data from sell-side financial analysts and employing a regression discontinuity design, we find that analysts whose forecasts have barely been met become increasingly optimistic relative to when their forecasts have barely been missed. This result is consistent with an update of analysts’ expectations after observing uninformative performance signals. Our results also suggest that this behavior leads to significantly worse forecasting accuracy in the subsequent quarter. We contribute to the literature by providing important field evidence of expectation formation under uninformative signals. |
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Fabienne Jedelhauser, Raphael Flepp, Egon Franck, Overshadowed by popularity: The value of second-tier stars in European football, In: UZH Business Working Paper Series, No. 397, 2022. (Working Paper)
Superstars in European football are exceptionally talented and enjoy celebrity status. While second-tier stars, i.e., players barely below superstar status, lack popularity, their marginal contribution to team performance on the pitch relative to that of superstars is unknown. Relying on league-specific preseason market value distributions to define superstars and second-tier stars, we compare the marginal contributions of superstars and second-tier stars to team performance on the pitch in the top five European football leagues. Examining the impact of unexpected injury-related absences, we find that second-tier stars’ marginal contribution is at least equal to that of superstars. Thus, European football players with the highest market values do not outperform second-tier stars in terms of their marginal contributions to team performance on the pitch. These findings have important implications for football managers, as the players with arguably the highest costs for clubs do not contribute accordingly to short-run sportive success. |
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Julius Lüttge, Job mobility and wage growth between regions, In: URPP Equality of Opportunity Discussion Paper Series, No. 8, 2022. (Working Paper)
Individual wage growth is higher in more densely populated regions. Using data on detailed labour market biographies from Germany, this paper shows that job mobility contributes to this urban premium in wage growth. In urban regions, wage growth is higher both within jobs and between jobs. The higher between-job wage growth is driven by a combination of higher frequency of job changes and a higher payoff of moving between jobs. This finding is consistent with better coordination in denser labour markets. Further evidence shows that the gain from higher urban wage growth is not lost upon moving across regions, suggesting that a better job match results in higher human capital accumulation. |
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Julius Lüttge, Occupational change and wage inequality in Germany, In: URPP Equality of Opportunity Discussion Paper Series, No. 6, 2022. (Working Paper)
Wage inequality between education groups in Germany has increased sharply in recent decades. This paper studies how compositional changes to the occupational structure and the geographic distribution of different types of jobs have affected this type of inequality. Employment has shifted away from traditionally mid-paying production occupations towards higher-paying cognitive/interactive occupations, and – to a lesser extent – towards low-paying manual services. However, only workers with university degrees have benefited from the expansion of higher-paid work. This increase in polarization played out relatively evenly across space. While such occupational shifts can contribute to between-group wage inequality, in the German case, the increase in occupational polarization was not large enough to materially contribute to wage inequality between education groups. |
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Julius Lüttge, Urban wage premia and heterogeneous sorting, In: URPP Equality of Opportunity Discussion Paper Series, No. 7, 2022. (Working Paper)
Wages are higher in urban regions. These urban wage premia may be driven by sorting of more productive workers into urban regions, by a static productivity advantage, and by higher wage growth. This paper documents a size-earnings elasticity of five per cent in Germany. Sorting of more productive workers into larger regions explains 40 per cent of this elasticity. The remainder is driven in equal parts by a static productivity effect and a dynamic learning effect. The urban wage premium is strongly increasing in educational attainment. This is largely driven by different degrees of sorting between education groups. Similarly, there are large urban wage premium differences between occupation groups, which are entirely driven by differences in sorting. |
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Geoffroy Legentilhomme, Matthieu Leimgruber, Top wealth in Switzerland, 1890-1990: debates, sources, and research perspectives, In: URPP Equality of Opportunity Discussion Paper Series, No. 5, 2022. (Working Paper)
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Eva M Berger, Ernst Fehr, Henning Hermes, Daniel Schunk, Kirsten Winkel, Teaching self-regulation, In: URPP Equality of Opportunity Discussion Paper Series, No. 4, 2022. (Working Paper)
Children’s self-regulation abilities are key predictors of educational success and other life outcomes such as income and health. However, self-regulation is not a school subject, and knowledge about how to generate lasting improvements in self-regulation and academic achievements with easily scalable, low-cost interventions is still limited. Here, we report the results of a randomized controlled field study which integrates a short self-regulation teaching unit based on the concept of mental contrasting with implementation intentions into the school curriculum of first graders. We demonstrate that the treatment increases children’s skills in terms of impulse control and self-regulation while also generating lasting improvements in academic skills like reading and monitoring careless mistakes. Moreover, it has a substantial effect on children’s long-term school career by increasing the likelihood of enrolling in an advanced secondary school track three years later. Thus, self-regulation teaching can be integrated into the regular school curriculum at low cost, is easily scalable and can substantially improve important abilities and children’s educational career path. |
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Stephan Nebe, Andre Kretzschmar, Philippe Tobler, Characterizing human habits in the lab, In: PsyArXiv Preprints, No. tgf27, 2022. (Working Paper)
Habits pose a fundamental puzzle for those aiming to understand human behavior. They pervade our everyday lives and dominate some forms of psychopathology but are extremely hard to elicit in the lab. In this Registered Report, we develop novel experimental paradigms grounded in computational models, which suggest that habit strength should be proportional to the frequency of behavior and, in contrast to previous research, independent of value. Specifically, we manipulate how often participants perform responses in two tasks varying action repetition without, or separately from, variations in value. Moreover, we ask how this frequency-based habitization relates to value-based operationalizations of habit and self-reported propensities for habitual behavior in real life. |
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Alessandro Ferrari, Inventories, demand shocks propagation and amplification in supply chains, In: ArXiv.org, No. 2205.03862, 2023. (Working Paper)
I study the role of industries’ position in supply chains in shaping the transmission of final demand shocks. First, I use a shift-share design based on destination-specific final demand shocks and destination exposure shares to show that shocks amplify upstream. Quantitatively, upstream industries respond to final demand shocks up to three times as much as final goods producers. To organize the reduced form results, I develop a tractable production network model with inventories and study how the properties of the network and the cyclicality of inventories interact to determine whether final demand shocks amplify or dissipate upstream. I test the mechanism by directly estimating the model-implied relationship between output growth and demand shocks, mediated by network position and inventories. I find evidence of the role of inventories in explaining heterogeneous output elasticities. Finally, I use the model to quantitatively study how inventories and network properties shape the volatility of the economy. |
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Finkelfarb Lichand Guilherme Lichand, Sharon Wolf, Measuring child labor: whom should be asked, and why It matters, In: SSRN, No. 4125068, 2022. (Working Paper)
Child labor is a pervasive practice; according to the International Labor Organization, there are 160 million child workers worldwide. That figure might, however, greatly underestimate the extent of the issue, since child labor indicators are typically based on surveys with parents – who have no incentive to truthfully disclose that their children work. This, in turn, poses important challenges to the ability of governments and international organizations to monitor and enforce children’s rights. Combining survey data, based on independent reports from primary school children and their parents in two cocoa-producing regions of Côte d’Ivoire, with novel third-party data from costly certification of cocoa production in these regions, partly based on satellite imagery, we show that adults dramatically under-report child labor in our study sample by a factor of at least 60%; in turn, children self-reports provide accurate regional and aggregate accounts of child labor. Evaluating the impacts of a campaign to discourage child labor, we also show that parents’ reports not only underestimate its prevalence, but can even lead to the wrong conclusions about whether and how policy interventions affect child labor. |
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Finkelfarb Lichand Guilherme Lichand, Julien Christen, Eppie Van Egeraat, Neglecting students’ socio-emotional skills magnified learning losses during the pandemic: experimental evidence from Brazil, In: SSRN, No. 3724386, 2022. (Working Paper)
Did the dramatic learning losses from remote learning in the context of COVID-19 stem at least partly from schools having overlooked students’ socio-emotional skills – such as their ability to self-regulate emotions, their mental models, motivation, and grit – during the emergency transition to remote learning? We study this question using a cluster-randomized control trial with 18, 256 high-school students across 87 schools in the State of Goiás, Brazil. The intervention sent behavioral nudges through text messages to students or their caregivers, targeting their socio-emotional skills during remote learning. Here we show that these messages significantly increased standardized test scores relative to the control group, preventing 7.5% of learning losses in math and 24% in Portuguese, consistent with the hypothesis that neglecting students’ socio-emotional skills magnified learning losses during the pandemic. |
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Gregory S. Crawford, Matteo Courthoud, Regina Seibel, Simon Zuzek, Amazon entry on Amazon Marketplace, In: CEPR Discussion Papers, No. 17531, 2022. (Working Paper)
There is an active policy debate seeking to understand whether Amazon first-party entry in competition with third-party merchants harms these merchants, and ultimately consumers, on Amazon Marketplace. Some argue that the exploitation of third-party data permits seller expropriation and reduces innovation while others claim that such entry permits the internalization of important externalities, benefiting consumers and merchants alike. We seek to inform this debate by measuring the predictors and effects of Amazon first-party retail entry on consumer and third-party merchant outcomes in the Home & Kitchen department of Germany’s Marketplace between 2016 and 2021. We find Amazon entry both within and across products is associated with modest positive effects on both consumer and third-party merchant outcomes more consistent with mild market expansion than with appropriating third-party sales. We find that both Amazon and large third-party merchants’ entry is associated with fewer subsequent new product introductions, but that these are consistent with regression to the mean rather than causal effects on innovation. Finally, we find that the predictors of Amazon’s within-product entry decisions are more consistent with a strategy that makes Marketplace more attractive to consumers than of third-party seller expropriation, including consideration of predictors based on aggregated Marketplace data. While the empirical setting presented challenges for estimating causal effects, our results are broadly inconsistent with systematic adverse effects of Amazon entry on Amazon Marketplace. |
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Finkelfarb Lichand Guilherme Lichand, Onicio Leal-Neto, John Phuka, Roselyn Chipojola, Beverly Laher, Michelle Bosquet Enlow, Anne Elizabeth Sidamon-Eristoff, Kelsey Quigley, Adriana Weisleder, Casey Lew-Williams, Paola Garcia, Alexandra Carstensen, Jessica Kosie, Asana Okocha, Daniel Robles, Daniela Paolotti, Nicolo Tomaselli, Laura Ogando, Ciro Cattuto, Pedro Carneiro, The early childhood development replication crisis, and how wearable technologies could help overcome it, In: SSRN, No. 4162049, 2022. (Working Paper)
Early Childhood Development (ECD) programs are currently understood as critical for children’s cognitive and socioemotional development, especially for those from disadvantaged backgrounds or most at risk for poor outcomes. Nevertheless, while the pioneering ECD programs evaluated in the literature have shown large and long-lasting impacts, replicating their successes has proven challenging in more recent years. We characterize this replication crisis and provide perspectives on how wearable technologies could help overcome it. |
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Sebastian Bustos, Dina Pomeranz, Juan Carlos Suárez Serrato, José Vila-Belda, Gabriel Zucman, The race between tax enforcement and tax planning: evidence from a natural experiment in Chile, In: CEPR Discussion Papers, No. 17347, 2022. (Working Paper)
Profit shifting by multinational corporations is thought to reduce tax revenue around the world. We analyze the introduction of standard regulations aimed at limiting profit shifting. Using administrative tax and customs data from Chile in difference-in-differences event-study designs, we find that the reform was ineffective in reducing multinationals’ transfers to lower-tax countries and did not significantly raise tax payments. At the same time, interviews with tax advisors reveal a drastic increase in tax advisory services. The qualitative interviews also allow us to identify and then quantitatively confirm a common tax planning strategy in response to the reform. These results illustrate that when enforcement can be circumvented by sophisticated tax planning, it can benefit tax consultants at the expense of tax authorities and taxpayers. |
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David Hémous, Morten Olsen, The firms behind the labor share: evidence from Danish micro data, In: Study paper / The Rockwool Foundation Research Unit, No. 173, 2022. (Working Paper)
We establish a sizable shift in the individual labor shares of Danish firms since 1999. Whereas the mean and median labor shares have increased by around 5 points, the labor share of the largest firms is much lower today, in particular the labor share of manual workers. A substantial part of this is driven by the top 1 per cent of firms that have grown substantially bigger. The main driver of this is an increase in markups, though large firms have become more capital intensive during the period. We show that investments in capital and R&D predict declines in the labor share. Though offshoring activities have impacted the labor share it is not a strong quantitative driver of the results. We show that these changes tie strongly to the firms' export behavior: Large firms with lower labor share scale up value of exports, though not number of destinations nor product category. The increase in value comes predominantly from increases in quantity. |
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