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Below is the schedule for the Economics Seminar Series for the academic year 2015-2016, along with the abstract for each seminar. A downloadable version of the full schedule can be found here.
Why Do Children Provide Care and Attention to Their Elderly Parents? Evidence from Japanese Micro Data
In this paper, we conduct a theoretical analysis of why individuals provide care and attention to their elderly parents using a two-period overlapping generations model with endogenous saving and a “contest success function” and test this model using micro data from a Japanese household survey, the Osaka University Preference Parameter Study. To summarize our main findings, we find that the Japanese are more likely to live with (or near) their elderly parents and/or to provide care and attention to them if they expect to receive a bequest from them, which constitutes strong support for the selfish bequest motive or the exchange motive, but we find that their caregiving behavior is also heavily influenced by the strength of their altruism toward their parents and social norms.
Do financial indicators have directional predictability for US home sales?
This study investigates the directional predictability of financial indicators for home sales across tranquil (1984-2005) and volatile (1972-1983 and 2006-2013) periods. We find that the mortgage rate has directional predictability for both existing and newly built home sales for up to 2005. The federal funds rate generally has directional predictability for existing (newly built) home sales in 1984 -2005 (1972 -1983). The term spread has directional predictability for home sales in 1972 -1983 but generally not in the tranquil period of 1984 -2005. Further, unlike mortgage and federal funds rates, the term spread has directional predictability for home sales in 2006 -2013 and thus can help the Fed with useful information (assuming that this trend continues).
Renewable Energy Production and Greenhouse Gas Emissions
The environmental effects of renewable energy are surprisingly not well understood. Supporters praise renewable energy for its environmental benefits, opponents describe it as unreliable and potentially harmful to the environment, and previous research provides mixed results. I make use of U.S. state-level data for 2010 to assess the relationship between renewable energy production and greenhouse gas emissions. I find that states with a larger share of renewable energy have lower emissions of CH4, CO2, and N2O and those that have a higher coal share have higher emissions, net of other factors. I estimate that a 10% increase in the share of renewable energy production ought to decrease emissions of CH4 by 0.3%, CO2 by 0.2%, and N2O by 0.3%. These effects can be interpreted as either stabilizing or preventative if renewable energy is added to coal use or as corrective if renewable energy is used to phase out coal. I also find that the mitigation of greenhouse gas emissions, accounting for the use of coal for base load, requires that states individually decrease their share of coal use to levels below 39%.
Decision Rules for Precautionary and Retirement Savings
We report results from an experiment that tests the quality of savings behavior under both precautionary and retirement savings motives. We find evidence for five decision rules, two of which are either optimal or nearly optimal, for precautionary savings. When retirement is added as a motive for saving, the optimal decision rules disappear from the data, rules that specify constant consumption each period are substituted in their place. The use of these simple rules lowers efficiency by 6%, and the loss of efficiency is due to oversaving for retirement.
Risk Aversion in an Intermediary-augmented Exchange Economy
This paper investigates individuals' consumption and portfolio choices in the presence of financial intermediaries. Unlike the existing literature where individuals seamlessly transform their savings to productive assets, I show that individuals employ intermediaries, who in turn channel savings to productive assets. As a direct consequence, growth of intermediaries' balance sheet variables such as assets determines the stochastic discount factor. Redefining the consumption and portfolio choices problem in such a way help resolve the equity premium puzzle. In the cross-section of size, value and industry portfolios, intermediary-based single factor models outperform Fama-French three- or four-factor models.
Competition and Risk-Aversion of Family Firms in the Era of Talent Management
This article contributes to the debate about the economics of talent by investigating how competition and firm risk-attitude affect firms' investment decisions in talent management. We extend the Asplund's (2002) model by considering that talent is an extremely uncertain dimension affecting both the production and the cost function allowing us to derive two important propositions. First, risk-averse and risk-neutral firms differ in terms of investment in talent management practices. Second, because of the relationship between direct competition and returns to talent management practices, risk-averse firms may significantly change their investment decisions when the number of direct competitors increases. We test our theoretical predictions by using a large international sample of family and non-family firms which represent two groups of firms with different attitude towards risk. In line with our initial conjectures, we found that family firms, renowned to be more risk averse than non-family firms, tend to invest more than non-family ones in talent management practices only when direct competition raises. Contributes and policy implications are discussed.
The Role of Aviation Networks for Urban Development
Local officials are continuously putting effort to attract to their cities airlines that offer new non-stop fight services. Besides facilitating travel for their constituents, the inherent expectation is that a stronger aviation network stimulates economic growth. This paper investigates empirically the causal implication of this hypothesis. Using data on non-stop flights by origin and destination over the period 1984-2001, we construct a measure of a city's connectivity to the national aviation network. We then use this measure to investigate its contribution to local economic development, as reflected by the market size, employment level and new firm entry. To ensure causality, we use instrumental variable methods and exploit geography and weather patterns at destination cities to capture the exogenous variation in the likelihood to add new travel routes. Our results suggests that a city's air connectivity, resulting from an extensive local aviation network, has a positive effect on population size, on employment level and on the number of active businesses established in that location.
Exchange Rate Dynamics: An Emerging Market Perspective
Combining the asset-market approach to exchange rate determination with insights from market microstructure, we develop an emerging market narrative on exchange rate dynamics. The model's performance is tested on the Real, Rand and Naira (Brazil, South Africa, and Nigeria). Results (out-of-sample predictive content) are evaluated against the benchmark specification of random walk (the current industry "gold standard").
Poaching and the Dynamics of a Protected Species
We develop a model of an opportunistic poacher harvesting a protected species within a protected area. A labor allocation problem is coupled with protected species' population dynamics to numerically estimate approach paths of poaching effort and protected population. Harvest follows a Schaefer function form, and protected species growth assumes a logistic function form. The harvest and growth functions allow for both oscillatory convergence to steady state and period-doubling bifurcation. The model reveals that population dynamics goes through bifurcation for changes in both economic and biological parameters, and in some cases gives way to "deterministic" chaos. We find that policy parameters such as wage rates in and around protected areas, fines for poaching, and the black market prices for the protected resource have qualitatively different effects on population dynamics. The effectiveness of anti-poaching enforcement has different qualitative effects on population dynamics depending on the biological parameters used. The model reveals interesting and sometimes counter-intuitive population dynamics for changes in economic and biological parameters. We derive optimal poaching (feedback) policies and conduct stability analyses to better understand the counterintuitive dynamics; these are seen to result when stable steady states do not exist in renewable resource systems.
Why is interest free Islamic banking not free from interest?
This paper shows how debt in conventional banks and the Murabaha (lending) instrument in Islamic banks converge under competition. The competitive pricing mechanism induces Islamic banks to structure the Murabaha financial product with risk profile similar to that of the conventional bank's debt. Thus, competition crowds out original Islamic financial structures and creates Shariah compliant replicas. The competitive pricing on the asset side in Islamic banks also causes the liability side Mudarabah rate with depositors to converge to the conventional deposit rate. Theoretical arguments in this paper are then supported by an empirical analysis using the linkages of benchmark interbank offer/lending rates between conventional banks and Islamic banks; for conventional banks, we take London interbank offer rate (LIBOR) and for Islamic banks we take Islamic interbank benchmark (offer) rate (IIBR). Our theoretical and empirical findings suggest that the Islamic financial instruments that are currently dominant in the industry differ from their conventional counterparts only in terms of their legal lexicon but in essence have little financial or structural differences.
When Less Information is Good Enough: Experiments with Global Stag Hunt Games
The classic stag hunt game features both payoff-dominant and risk-dominant equilibria. Experimental research has established that individuals are able to coordinate on the former. However, once a very small amount of noise is added to the payoffs, the theory of global games shows that only the latter remains as a unique equilibrium. Since individuals may coordinate to achieve higher payoffs even in the absence of equilibrium, it is unclear whether having less precise information would significantly reduce social welfare in practice. This paper reports an experiment where each subject plays a sequence of perturbed stag hunt games with either complete or incomplete information. Under incomplete information, subjects deviate significantly from the equilibrium prediction, achieving nearly identical levels of efficiency as subjects in the complete information treatment. Thus the efficiency loss from observing imprecise information is not as large as theory would suggest.
The School to Work Transition in Qatar
While Qatari unemployment is low compared to regional standards, unemployment is even more concentrated among first time job-seeking youth than in other countries in the Arab world. This paper examines the factors that influence unemployment by young Qataris when they are first entering the labor market. This paper first introduces the set of labor market policies that govern the employment of Qatari nationals. Next, the paper examines the labor market outcomes of Qatari youth from 1995 to 2014 to evaluate the effect of these policies. Finally, the paper uses a unique data set of 2,000 primarily young Qataris to model unemployment duration. These data were collected in September and October of 2014 and explore typical labor market indicators as well as questions concerning the school to work transition. Using non-parametric models of unemployment duration, this paper describes the different characteristics that are correlated with longer spells of unemployment duration by first time job seekers. The paper finds that own education and gender are the two most important factors influencing the school to work transition for young Qataris.
Perceptions of intimate partner violence during armed conflict. The case of Iraq
This study explores Iraqi women's perceptions of intimate partner violence (IPV) during armed conflict. Data is synthesized from three sources, namely the Iraq Body Count database for civilian deaths, and the 2011 Multiple Indicator Cluster Survey and the Iraq Woman Integrated Social and Health Study 2011 for partner violence and sociodemographic variables. Results demonstrate that an increase in armed conflict is associated with the increased acceptability of wife-beating amongst women. This is consistent with marital power and social cognitive theories, with the discourse focusing on mutable power outcomes in favor of women as a perceived justification for violence. Specifically, the reconfiguration of gender relations stemming from armed conflict has inadvertently intensified marital tensions and so nurtured the acceptability of IPV. By exploring behavioral patterns amongst Iraqi women, this paper is a step towards developing effective policy to reduce IPV during times of state conflict.