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- Working Papers Series
Below is the schedule for the Economics Seminar Series for the Academic Year 2018-2019, along with the abstract for each seminar.
The Impact of Bequest Motives on Labor Supply and Retirement Behavior in Japan: A Theoretical and Empirical Analysis
In this paper, we conduct a theoretical and empirical analysis of the impact of bequest motives on the labor supply behavior of households at the intensive and extensive margins in Japan using micro data from the Preference Parameters Study of Osaka University in order to shed light on whether or not households planning to leave bequests work more or work longer than those not planning to leave bequests. Our estimation results for the altruistic bequest motive and the weak bequest motive are not clear, but our results for the strategic or exchange bequest motive are clearer, suggesting that respondents with a strategic or exchange bequest motive supply more labor at the intensive margin than those without any bequest motive in most cases. These results are entirely plausible because respondents with a strategic or exchange bequest motive may want to work harder than others before they retire so that they can earn more and leave a larger bequest to their children in order to be able to elicit more care and financial assistance from them but that they may want to retire earlier than others so that they can start receiving care and financial assistance from their children sooner.
The Effects of Business and Political Ties on Firm Performance: Role of Strategic Planning and Planning Flexibility
Drawing on previous literature proposing that both business and political ties are related to firm performance, this study attempts to refine the explanatory role of strategic planning and planning flexibility in the relation of business and political ties to both financial and non-financial firm performance. The data from 302 small-medium enterprises show that while business ties are positively related to strategic planning and planning flexibility; political ties are negatively associated to both strategic planning and planning flexibility. Also, we provide empirical evidence that strategic planning and planning flexibility positively mediate the relation of business ties to financial and non-financial performance. Conversely, there exist a negative indirect relation of political ties to financial and non-financial performance. This study also provides evidence of robustness for the analyses via an additional data collection from 53 small-medium enterprises. In a nutshell, this study provides empirical evidence that strategic planning and planning flexibility bind social ties to firm performance.
On extrinsic and intrinsic incentives to control rice straw burning: Experimental evidence from India
Post-harvest crop residue burning, to prepare for subsequent cropping cycles, is a widespread practice in many developing countries. This leads to spikes in air pollution in rural areas and neighboring urban centers. This paper examines how intrinsic and extrinsic motivations work in reducing this practice. We conduct a field experiment in Northern India with various information treatments including positively-framed social norms, negatively-framed social norms, and environmental awareness. We investigate the effect of each information treatment with and without extrinsic incentives, which are cash transfers for demonstrably not burning residues. We find that all of the intrinsic and extrinsic incentives significantly lower the chances of residue burning. The positively-framed social norm and environmental awareness treatments are more effective than the negatively-framed social norm treatment. Instead of a crowding-out effect between extrinsic and intrinsic incentives, we find strong complementarity between them. These incentives also result in a spillover effect on farm plots that are not subject to our experiment. Policymakers should take advantage of the complementarity between the two types of incentives to address such public policy concerns.
The Baker-Hopkin Model and the Origin of the Grameen Bank (GB) of Bangladesh
The Grameen Bank (GB) and its founder Professor Muhammad Yunus jointly received the 2006 Nobel Prize in World Peace. Following that, people’s interest on the GB and its operations has increased many fold all over the world. I have edited a book and written many articles and book chapters on various aspects of this institution, its outreach activities, and impacts. I have made international presentations on this topic in France, Tunisia, Singapore, etc. However, in this presentation, I will cover origin of the GB, its theoretical basis – the Baker-Hopkin model, modification of the model to fit the special needs of Bangladesh and the GB, implementation mechanisms, successes and failures.
Improving healthy eating in children: Experimental evidence
We conduct a field experiment to study whether and how it might be possible to incentivize children to make healthier food choices at school. We align children’s appraisal of food choices with their appraisal of schoolwork by introducing a system in which food items are graded based on their nutritional value. We also involve parents and classmates as change agents, providing them with information regarding the food choices of their children/friends. We find parents’ involvement in the decision process to be crucial in boosting a healthy behavior, with very strong results that survive months after our intervention was completed.
The environmental impact of immigration
Immigrants have suffered their share of finger-pointing and accusations. In particular, they have been blamed for contributing to climate change. Previous research, however, does not provide categorical support for such a simplistic line of reasoning. Immigrant assimilation is a complex, evolutionary, multifaceted, and dynamic process and its interaction with the environment is far from being clear cut. This paper departs from previous research by using panel data for the United States over the 1997-2012 period and simultaneous equation modeling to address the impact of immigration on environmental emissions. It finds evidence of an inverse relationship between the share of immigrants and emissions of CO2, CH4, and N2O. Estimates are robust across alternative specifications and after accounting for endogeneity and spatial variability. These results provide support for a causal relationship between immigration and the environment. It also helps settle to some extent previous calls for restricting immigration on environmental grounds.
Bank Capital and the Cost of Equity
The present paper examines the impact of capital on banks’ cost of equity. Specifically, we use a large sample of banks from 45 countries, over a twenty-year period (1998-2017), to gauge the effect of various measures of bank capital on the cost of equity. Our starting point is the theoretical prediction that as a firm shifts to a capital structure with more equity, its cost of equity decrease. Our empirical analysis documents evidence of a robust, statistically and economically significant, negative relationship between bank capital and the cost of equity. Depending on the country and the period, a one percentage point increase in the leverage ratio (equity-to-assets) reduces the cost of equity by 9 to 15 basis points.
Deterring Bribes with Reserve Price: An Auction Experiment
This paper experimentally investigates bribing behaviors in the first-price sealed-bid auctions with private and independent values. Before the auction, one bidder may offer the other bidder for a commitment not to participate in the auction. We consider two treatments: one with no reserve price and one with the optimal reserve price. Even though theory predicts no bribe offered in any of the treatments, we observe prevalent bribing and the bribes were frequently accepted in both treatments. The responders demand a larger proportion of benefit in the treatment with reserve price, while the proposers offer proportionally the same bribe amounts in the two treatments. As a result, the average bribe amount and rate of successful bribes are significantly lower in the treatment with reserve price. Although imposing the reserve price reduces efficiency, its optimality and bribe deterrence shift surplus from the bidders to the seller.
Bank Value and Liquidity Creation
Although one of the primary contributions of banks to economic welfare is the creation of liquidity, there is no clear evidence of the value liquidity creates for banks themselves. This is especially striking as it is well established that the combination of liquid liabilities with illiquid assets, both on- and off the balance sheet, generates synergies for banks, but also exposes them to a variety of risks, such as depositor runs. Ex-ante, the net effect of $1 in created liquidity on bank value is therefore not clear. This paper shows that liquidity creation has a highly significant and positive impact on bank value. The main driver behind this effect is liquidity creation through short-term deposits and off-balance sheet loan commitments. In aggregate, a bank marginally increases its value by 6 cents for each $1 in created liquidity. Our results are confirmed by two separate samples of U.S. Bank Holding Companies over a total period of 1990 to 2016, using a variety of value and liquidity creation measures.
Religiosity, Neglected Risk and Asset Returns: Theory and Evidence from Islamic Finance Industry
This paper studies the sociological influence of religion on the risk and return in the financial markets with particular context of Islamic finance, a rapidly emerging and expanding financial industry. The paper builds a theoretical model to show how intermediaries serve their customers’ religious needs by creating innovative Islamic financial instruments. The customer’s emphasis on religiosity exposes the industry to a theological risk, which can increase the financial fragility of the system. In our model, the theological risk emerges as a neglected component, which can be realized in the event of a bad news challenging the religious legitimacy of (Islamic) finance structures. To corroborate our theoretical findings, we present two sets of results. First, using stock prices data for 104 Islamic bond (Sukuk) issuers, we show that Islamic bond issuers experienced a significant decline in their stock prices, following multiple formal and informal announcements in 2008, which challenged the religious legitimacy of Islamic bond structures. Second, using data from 1360 newly issued Malaysian Sukuk from 2006 to 2016, we find that following the regulatory changes the Sukuk margins have increased significantly. This suggest that there may be a significant difference between what Islamic and conventional customers may be willing to pay for Sukuk, exposing the industry to a unique form of religious risk.
Export Activity and Productivity: The Joint Effect of Family Involvement and Context
If export affects productivity, exporter’s productivity, at least in the same industry, should converge. However, productivity is uneven distributed among exporters. To explain this phenomenon we link the behavioral theory of the firm and the contingency approach to theoretically justify that the prospect of future incomes, which is a condition to maintain the long-term commitment investment to export activities, depends on how the firm’s dominant coalition interprets the contextual changes. We used a unique longitudinal database consisting of 32,921 observations of Spanish firms belonging to 20 manufacturing industries over the period 1990-2014. We find that export activity positively affects firm productivity. While the shift from a flexible to a fixed exchange rate regime negatively influence non-family firm exporter productivity, the economic crisis positively impact on family firm exporter productivity.
On the role of real-time leaderboards in dynamic research contests
This paper studies information disclosure in research contests. We analyze a multi-agent winner-takes-all contest in which each agent decides when to stop a privately observed search for innovations. Each agent makes a one-time submission of her best discovery to the organizer before a deadline. The contest ends when submissions are made from all agents, and the agent with the best innovation wins. The contest organizer chooses between a public policy where all previous submissions are immediately revealed to the public, and a hidden policy where all submissions are revealed to the public after the organizer receives all submissions from the agents. We analyze the agents’ equilibrium behavior under the two disclosure policies. We find that the disclosure policies drastically affects the agents’ equilibrium search behavior. In particular, the organizer strictly prefers to immediately reveal a submission from a stopping agent for search contests with long horizons, in that such research contests induce the most intensive search behavior from the agents in equilibrium.
Excluded Property Ownership and Domestic Violence: A Case of Latin America
We present a game-theoretical model of domestic violence where the wife’s net worth includes excluded property assets that are not part of asset division in case of divorce. One of the main findings of the theory is that a wife’s ownership of excluded property assets reduces domestic violence against her. Further, illiquid property asset is more effective than ordinary wealth in deterring violence. The theory’s key hypotheses are tested empirically using cross-sectional household-level survey data from Dominican Republic, Guatemala, Haiti, and Honduras. Consistent with the theoretical results, property ownership by women, particularly house ownership, is associated with lower probability of domestic abuse by husbands. Higher women employment status, on the other hand, is negatively correlated with the likelihood of domestic violence. The findings have important development policy implications.