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- Working Papers Series
Below is the schedule for the Economics Seminar Series for the Academic Year 2017-2018, along with the abstract for each seminar. A downloadable version of the full schedule can be found here.
Worshipping The Tiger For Its Own Sake
Indigenous tribes have customs of worshiping species - such as tigers – wherein conservation is not a prime objective, but rather an unintended consequence. Conventional species management practices ignore this sacredness aspect of wildlife and tribes are often evicted from native areas in the name of protected area conservation. We use the existence value framework to develop a coupled ecological-economic model of a social portfolio manager who optimizes the net benefits of harvesting a protected resource. Existence value is derived from the non-consumptive public good benefits of a sacred resource. The model is calibrated for the BRT Tiger Reserve in India with the resident Soligas tribe who consider tigers as sacred. The coupled model allows us to ascertain tiger population dynamics under several conservation management scenarios. Steady-state convergence is observed under secure property rights for the Soligas. Scenarios in which they are evicted from the BRT reserve and lose their property rights renders localized tiger extinction as an optimal outcome. Our model facilitates the numerical derivation of cardinal values of tigers’ sacredness for the Soligas. The derivation of tigers' sacredness value provides a broader picture of species preservation benefits in the realm of public goods for the BRT and the conservation community in general.
Random parameters and (in)appropriate inference
We consider estimation of the standard errors of individual-specific random parameters calculated ex-post from a non-linear model. To demonstrate the technique’s applicability, we use it to model the determinants of the Bank of England Monetary Policy Committee (MPC) members’ policy choices in a random parameters ordered probit framework, extending the literature on monetary policy committee decision making. Our results have implications for the characterization of unobserved heterogeneity that extend beyond our application especially in small N and large T panels and with respect to how statistical inference on the estimated random parameters is drawn. Underscoring our contribution is the general applicability of the described approach to all other non-linear models.
Honesty, trust, trust worthiness and socio-demographics: An experimental study in Bangladesh
In Bangladesh rampant corruption in every level of the society and weak public institutions have become one of the most important deterrent of development. We believe, studying the variation of moral and social capital across different socioeconomic dimensions should be the first step towards a systematic search for solution to this perilous state. In an effort to contribute to this search, in this experimental study, we look into the level of honesty, trust and trustworthiness among the educated youth in Bangladesh and investigate the role of different demographic, social and economic factors in the development of their moral quality. First year students from two leading universities in Bangladesh participated in our experimental sessions, where we try to evaluate their behavior in terms of honesty, trust and trustworthiness. Our data reveal both significant dishonesty and low level of trust and trustworthiness at the average level. We did not find cheating behavior and trust to be correlated. Cheating behavior is correlated with trustworthiness in the predicted direction. Although the participants who did not cheat on average showed higher trustworthiness, the average return from them is less than the amount sent to them in the trust game, showing a lack of regards for other’s wellbeing even amongst the honest people. We did not find any systematic variation in the level of honesty across the economic classes represented by parents’ income and education. What indicates economic development and improvement in standard of living may not automatically translate into higher moral capital. Though we find own performance positively affect honesty in behavior. We also compare participants' self reported behavior and attitude towards honesty, trust and social engagement and actual behavior in the experiment.
A “Catch-22” Dilemma: Self-inflicted Failure of Nationalization Policies
This paper explains prevalent earnings differentials in GCC’s private sectors between skilled local and migrant labor, and provides estimates of potential price distortions to underlie future market-based corrective policies that increase participation of locals in private employment. The paper uses an individual-level data set on workers’ earnings and productivity-related characteristics to decompose estimated earnings differentials at the mean level and at various percentiles of the earnings distribution via well-established decomposition approaches. Results show that the real earnings differential between locals and Asians decreases at higher earnings, while that between locals and non-GCC Arabs relatively stable. The paper is the first to analyze GCC’s private earnings differentials at the individual level and provides micro-econometric evidence.
The information content of grades
Course grades of multi-year (2006-2012) cohorts of students are decomposed into subject, instructor, and student-specific components. The portion of the grade distribution attributed to instructor differences is small but statistically important. Observed instructor characteristics, such as rank and university-specific experience, do not predict outcomes. Student fixed effects and limiting the analysis to the first attempt of first-year courses minimize the effect of self-selection
Long Live the Vacancy
We reassess the role of vacancies in a Diamond-Mortensen-Pissarides style search and matching model. Long-lived vacancies and endogenous job separations together with alternating offer bargaining greatly improve the ability of the model to replicate key stylized labor market facts. The model explains not only standard deviations and autocorrelations of labor market variables, but also their dynamic correlations. The model is consistent with a large surplus both on the worker and the firm side, and generates a wage response to productivity shocks that is in line with empirical evidence on the wage dynamics of new matches. With only one shock, the model captures the dynamics of the US labor market from 1951 to 2014 surprisingly well.
New Technology, Trading Costs, and Financial Markets: Evidence from Bitcoin
In this paper, we examine the trading costs (both implied and quoted spreads) of Bitcoin and Bitcoin-based assets in three markets: in the cryptocurrency exchanges using the underlying Bitcoin, in the equity markets using Greystone Bitcoin Investment Trust, and in the derivatives markets using the newly introduced Bitcoin futures. We find that aggregated implied and quoted spreads across exchanges for Bitcoin, GBTC, and Bitcoin futures are comparable in magnitude, implying that fundamentals drive digital assets’ trading costs. Further, we find that while spot Bitcoin and Bitcoin futures prices are similar, GBTC trades at a 51% premium to underlying Bitcoin in the equity market. Our results provide quantitative guidelines for the future development of financial products based on Blockchain technology.
Social Cohesion and Optimal Redistribution in a Model of Endogenous Growth
We suggest that as social cohesion improves, the macroeconomic gains from progressive redistribution decline. Social interactions facilitate diffusion of nonrival knowledge. The consequent bridging of the knowledge gaps makes learning cheaper for children with limited access to adults with high human capital and thereby lowers the optimal progressivity for a redistributive policy. If social cohesion exceeds a critical threshold then zero progressivity would be optimal. Numerically, a country with greater social cohesion finds smaller gains in growth, efficiency, and welfare from progressive redistribution over and above the gains from a Pigouvian subsidy that eliminates the inefficiency caused by knowledge externalities.
Does Fiscal Decentralization Mitigate Internal Conflict?
Many countries have embarked on decentralization as a way to mitigate the separation tendencies. Even though decentralization might satisfy some separation tendencies, the central government might be unable or unwilling to award the localities the level of decentralization they required to stay in the union. Hence, this mismatch may give rise to internal conflict and domestic violence. In this paper, we propose a simple two-stage model that combines the decentralization and domestic conflict literature in a single structural model and can be readily tested by existing data in the disciplines. As long as the decentralization met the unobserved desired value of the decentralization by the localities, there will be a low probability of domestic violence acts and a high likelihood to observe a zero incidence of internal conflict. Otherwise, the incidences happen regularly with mitigating effect from decentralization. We examine our model using a panel data containing about 60 countries with decennial data from 1975 to 2005. Our results indicate a strong negative and statistically significant relationship between the incidence of internal conflict and fiscal decentralization. The coefficient of the selection model and internal conflict model generally conform with the decentralization literature and internal conflict literature, respectively.
A Study on the Link between Rhino Poaching in Africa and Asia
The illicit harvesting of rhino horns has been increasing in South Africa and India in the last few years. Conservation organizations point to an alleged nexus of rhino poaching between the source countries and black markets in East Asia, particularly China and Vietnam. Rhino horns, which are used in traditional East Asian medicines, have witnessed spurs in demand over the last few years - especially with rising incomes. Organized crime groups manage the supply of rhino horns through a clandestine network that includes poachers, middlemen, and corrupt authorities. In this paper, I use available poaching data between 1994 and 2016 to investigate the link between rhino horns sourced from South Africa and India and relate it to the demand arising from China and Vietnam. I find a significant link between poaching in the two source countries and a positive relationship to demand in East Asia, with a stronger link to demand in China than in Vietnam. I identify the relationship between poaching in South Africa and India by using recently updated country-level data from the World Bank on governance, corruption, and political stability. Finally, I develop a methodology to estimate black market prices of rhino horns based on how a criminal organization might manage the supply in order to meet the demand.
Group identity and charitable giving. Experimental evidence
This study explores group identity and its effect on charitable giving. For that, we propose a 2x2 experimental design where we change the existence of group identity and the type of donation (individual or in group). We find that group identity plays indeed a role when it comes to donate to charity. The most significant result corresponds to the case where there is group identity and the donation is made as a group (yet individually). We resort to individualism/collectivism theories to explain our results since, according to those; collectivist societies share stronger levels of group identity and are more cooperative. This could explain the differences in altruistic activities, such as charitable giving.
Prize-Linked Savings with Guaranteed Winners: Theory and Experiments
We theoretically and experimentally investigate decisions to allocate income in a savings account that bundles saving and lottery, so-called Prize-Linked Savings (PLS). At the end of a saving period, all PLS account holders will receive their principal and some will be randomly chosen to win a fixed prize. The winning probability of each participant is determined in the same fashion as in a Tullock's lottery. Each participant is asked to allocate his income among three options: immediate consumption, a traditional savings account with a fixed interest rate, and a PLS account. When assuming concave CARA utility function for each participant, there exists a unique equilibrium even though the participants' risk parameters differ. Under expected utility theory, we find that introducing a PLS account will reduce total savings by an individual, but our experimental evidence suggests otherwise. Specifically, most subjects choose to consume less and save more when both types of savings accounts are available than when the traditional savings account is their only saving option. This is consistent with theoretical predictions given pessimistic participants who underweight their probability of winning. We also find from the experiment that a PLS account is a more efficient tool to induce individuals to save than a traditional savings account.
Organic Farming and Environmental Emissions
We assess the relationship between organic cropland acreage and greenhouse gas emissions. Using panel U.S. state-level data and after accounting for other sources of emissions, we find that the environmental effect of devoting a higher share of cropland to organic farming is influenced by the transportation sector. This finding suggests that the environmental benefit of organic farming outweighs the harm of transportation embodied in organic food production. The current study provides evidence supporting potential environmental benefits associated with organic farming and would hopefully represent the basis for further research.
The Short- and Long-Run Impacts of Temperature on US Residential Energy Consumption
This paper contributes to the existing literature which looks at the effects of rising temperatures on energy demand, more specifically household energy consumption. We use a novel methodology to isolate extensive margin adjustments made in response to a changing climate from the intensive margin adjustments made in response to changes in weather. By controlling for both the contemporaneous temperature distribution as well as the lagged moving average, we are gaining on two fronts. Firstly, we are able to get more precise estimates of the effect of short-run changes in weather on residential energy consumption. Secondly, by comparing the two effects, we are able to back out the extensive margin effects on residential energy consumption made in response to changes in longer-term climate. Our estimates imply significant impacts for both the intensive and the extensive margins and a U-shaped response function of residential energy consumption with respect to contemporaneous temperature.
Do Women Anticipate Discrimination? Experimental Evidence
This paper studies experimentally whether men and women react strategically to anticipated discrimination in a labor-market setting and how this depends on the task they perform. Participants are assigned to a seven-person group and randomly allocated a role as a firm or worker. In each group, there are five workers and two firms. Firms decide which worker to hire to perform a task in a second stage. The only information firms have about each worker is an avatar representing the worker’s gender. Before firms making their decision, the workers must choose the avatar (male, female or neutral) that represents them in the market. Results show that when workers are hired to do a mathematical task (adding five two-digit numbers), women anticipate discrimination and only 36% reveal their real gender. However, when the task is not mathematical or when there is uncertainty regarding the task, women do not anticipate that they will be discriminated and almost 70% of them reveal their true gender. Results also show that almost 70% of males reveal their real gender when the task is math-oriented. Finally, we observe that most males (68%) also report their true gender even when the task is more female oriented.