Economics Research Works
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Item Uniform Inference in Panel Autoregression(MDPI, 2019-11-26) Chao, John C.; Phillips, Peter C. B.This paper considers estimation and inference concerning the autoregressive coefficient (𝜌) in a panel autoregression for which the degree of persistence in the time dimension is unknown. Our main objective is to construct confidence intervals for 𝜌 that are asymptotically valid, having asymptotic coverage probability at least that of the nominal level uniformly over the parameter space. The starting point for our confidence procedure is the estimating equation of the Anderson–Hsiao (AH) IV procedure. It is well known that the AH IV estimation suffers from weak instrumentation when 𝜌 is near unity. But it is not so well known that AH IV estimation is still consistent when 𝜌=1. In fact, the AH estimating equation is very well-centered and is an unbiased estimating equation in the sense of Durbin (1960), a feature that is especially useful in confidence interval construction. We show that a properly normalized statistic based on the AH estimating equation, which we call the 𝕄 statistic, is uniformly convergent and can be inverted to obtain asymptotically valid interval estimates. To further improve the informativeness of our confidence procedure in the unit root and near unit root regions and to alleviate the problem that the AH procedure has greater variation in these regions, we use information from unit root pretesting to select among alternative confidence intervals. Two sequential tests are used to assess how close 𝜌 is to unity, and different intervals are applied depending on whether the test results indicate 𝜌 to be near or far away from unity. When 𝜌 is relatively close to unity, our procedure activates intervals whose width shrinks to zero at a faster rate than that of the confidence interval based on the 𝕄 statistic. Only when both of our unit root tests reject the null hypothesis does our procedure turn to the 𝕄 statistic interval, whose width has the optimal 𝑁−1/2𝑇−1/2 rate of shrinkage when the underlying process is stable. Our asymptotic analysis shows this pretest-based confidence procedure to have coverage probability that is at least the nominal level in large samples uniformly over the parameter space. Simulations confirm that the proposed interval estimation methods perform well in finite samples and are easy to implement in practice. A supplement to the paper provides an extensive set of new results on the asymptotic behavior of panel IV estimators in weak instrument settings.Item Path-Independent Consideration(MDPI, 2021-03-02) Lleras, Juan; Masatlioglu, Yusufcan; Nakajima, Daisuke; Ozbay, ErkutIn the context of choice with limited consideration, where the decision-maker may not pay attention to all available options, the consideration function of a decision maker is path-independent if her choice cannot be manipulated by the presentation of the choice set. This paper characterizes a model of choice with limited consideration with path independence, which is equivalent to a consideration function that satisfies both the attention filter and consideration filter properties from Masatlioglu et al. (2012) and Lleras et al. (2017), respectively. Despite the equivalence of path-independent consideration with the consideration structures from these two papers, we show that, to have a choice with limited consideration that is path-independent, satisfying both axioms on the choice function that characterize choice limited consideration with attention and consideration filters unilaterally (from Masatlioglu et al. (2012) and Lleras et al. (2017)) is necessary but not sufficient.Item M&A and technological expansion(Wiley, 2023-06-13) Jin, Ginger Zhe; Leccese, Mario; Wagman, LiadWe examine how public firms listed in North American stock exchanges acquire technology companies during 2010–2020. Combining data from Standard and Poor's (S&P), Refinitiv, Compustat, and Center for Research in Security Prices, and utilizing a unique S&P taxonomy that classifies tech mergers and acquisitions (M&As) by tech categories and business verticals, we show that 13.1% of public firms engage in any tech M&A in the S&P data, while only 6.75% of public firms make any (tech or nontech) M&A in Refinitiv. In both data sets, the acquisitions are widespread across sectors of the economy, but tech acquirers in the S&P data are on average younger, more investment efficient, and more likely to engage in international acquisitions than general acquirers in Refinitiv. Within the S&P data, deals in each M&A-active tech category tend to be led by acquirers from a specific sector; the majority of target companies in tech M&As fall outside the acquirer's core area of business; and firms are, in part, driven to acquire tech companies because they face increased competition in their core areas.Item Using Topic-Modeling in Legal History, with an Application to Pre-Industrial English Case Law on Finance(Cambridge University Press, 2022-06-20) Grajzl, Peter; Murrell, PeterWe argue that topic-modeling, an unsupervised machine-learning technique for analysis of large corpora, can be a powerful tool for legal-historical research. We provide a non-technical introduction to topic-modeling driven by the presentation of an example of how researchers can use the data that topic-modeling produces. The context of the example is pre-industrial English caselaw on finance. We generate new insights on the timing of pertinent legal developments, the linkages of law on finance to other areas of law, and the relative importance of common-law and equity in the emergence of law and legal ideas relevant to finance. We argue that topic-modeling has the potential to bridge traditional legal history and economics, increasing the influence of the former on the latter, which is overdue. The output of topic-modeling includes the data required to generate a quantitative macroscopic overview of the flow of legal history. These data can be used in many ways in subsequent legal-historical research. Epistemologically, topic-modeling offers an escape from the temptations of Whig history and opens up new avenues for inductive analysis characteristic of traditional historical research.Item SIMULTANEOUS EQUATIONS MODELS WITH HIGHER-ORDER SPATIAL OR SOCIAL NETWORK INTERACTIONS(Cambridge University Press, 2022-03-28) Drukker, David M.; Egger, Peter H.; Prucha, Ingmar R.This paper develops an estimation methodology for network data generated from a system of simultaneous equations, which allows for network interdependencies via spatial lags in the endogenous and exogenous variables, as well as in the disturbances. By allowing for higher-order spatial lags, our specification provides important flexibility in modeling network interactions. The estimation methodology builds, among others, on the two-step generalized method of moments estimation approach introduced in Kelejian and Prucha (1998, Journal of Real Estate Finance and Economics 17, 99–121; 1999, International Economic Review 40, 509–533; 2004, Journal of Econometrics 118, 27–50). The paper considers limited and full information estimators, and one- and two-step estimators, and establishes their asymptotic properties. In contrast to some of the earlier two-step estimation literature, our asymptotic results facilitate joint tests for the absence of all forms of network spillovers.Item How is the U.S. Pricing Carbon? How Could We Price Carbon?(Cambridge University Press, 2022-11-22) Aldy, Joseph E.; Burtraw, Dallas; Fischer, Carolyn; Fowlie, Meredith; Williams, Roberton C. III; Cropper, Maureen L.Economists have for decades recommended that carbon dioxide and other greenhouse gases be taxed – or otherwise priced – to provide incentives for their reduction. The USA does not have a federal carbon tax; however, many state and federal programs to reduce carbon emissions effectively price carbon – for example, through cap-and-trade systems or regulations. There are also programs that subsidize reductions in carbon emissions. At the 2022 meetings of the American Economic Association, the Society for Benefit-Cost Analysis brought together five well-known economists – Joe Aldy, Dallas Burtraw, Carolyn Fischer, Meredith Fowlie, and Rob Williams – to discuss how the USA does, in fact, price carbon and how it could price carbon. Maureen Cropper chaired the panel. This paper summarizes their remarks.Item CENTRAL LIMIT THEORY FOR COMBINED CROSS SECTION AND TIME SERIES WITH AN APPLICATION TO AGGREGATE PRODUCTIVITY SHOCKS(Cambridge University Press, 2022-09-19) Hahn, Jinyong; Kuersteiner, Guido; Mazzocco, MaurizioCombining cross-sectional and time-series data is a long and well-established practice in empirical economics. We develop a central limit theory that explicitly accounts for possible dependence between the two datasets. We focus on common factors as the mechanism behind this dependence. Using our central limit theorem (CLT), we establish the asymptotic properties of parameter estimates of a general class of models based on a combination of cross-sectional and time-series data, recognizing the interdependence between the two data sources in the presence of aggregate shocks. Despite the complicated nature of the analysis required to formulate the joint CLT, it is straightforward to implement the resulting parameter limiting distributions due to a formal similarity of our approximations with Murphy and Topel’s (1985, Journal of Business and Economic Statistics 3, 370–379) formula.Item Burst of Fall, A Painting by Alma Thomas(2019-01) Almon, Clopper"Burst of Fall" is a 1968 painting by the Alma W. Thomas, and African-American woman painter of the Washington Color school. This brief note describes the circumstances of its origin and of its initial purchase. It includes as jpg image of the painting.Item The Gwx Story(www.CreateSpace.com, 2017) Almon, ClopperThis is the story in tutorial form of the creation of a program, Gwx, for building economic models, both macroeconomic and multisectoral. The program closely resembles the G7 program. Like G7, it is written in C++ but it is built with free, open-source, cross-platform tools. There are many books about how to use some specific computer program but few about what was going on in the mind of the designer and programmer as the project evolved, as problems emerged and were solve. This is such a book. The program, Gwx, is designed to be used with the author's book, The Craft of Economic Modeling.Item The Craft of Economic Modeling(www.CreateSpace.com, 2017) Almon, ClopperThis book is a practical guide to building economic models, both macroeconomic and multisectoral. It uses free software available from the Internet together with regularly updated databanks including the quarterly national accounts of the United States. It does NOT deal with some recent fads in economic model building, such as Real Business Cycles, Computable General Equilibriium models, nor DSGE models, all of which are, in the author's opinion, "alternative reality" models at best.Item Inforum Models: Origin, Evolution, and By-ways Avoided(Institute of Economic Forecasting, Russian Academy of Sciences, 2015) Almon, ClopperInforum models combine input-output tables with econometric analysis in dynamic models in which the investment in each industry depends upon the growth of output in that industry. They have been built and used in a number of countries including the USA, Russia, Germany, Poland, Latvia, Austria, Italy, Spain, the United Kingdom, South Africa, Mexico, Colombia, China, Japan, Taiwan, Thailand, and Vietnam and perhaps others. They make extensive use of econometrics and input-output analysis to describe the functioning of an economy not only at a macroeconomic level but also at the level of individual products and industries. This paper records – somewhat autobiographically on the part of the author -- the beginnings of these models, outlines their evolution, defends them and other econometric models against the sweeping Lucas critique, and mentions some of the fads in economics and modeling which have been avoided for good reason.Item Path Curves and Plant Buds: an Introduction to the Work of Lawrence Edwards(International Institute for Applied Systems Analysis, 1979-07) Almon, ClopperLawrence Edwards has shown that many flowering plants have buds with an outline in the form of a path curve, the curve that a point follows under repeated projective transformation of the plane into itself. Edwards, however, did not give a formula for these curves nor did he fit the curves by the standard method of least squares. This paper gives an elementary exposition of the method used by Edwards, shows its relation to projective geometry, and then uses homogeneous coordinates, linear differential equations and characteristic values and vectors of a matrix to derive the formula for path curves. This formula is then used to fit path curves by least squares to data provided by Edwards for the buds of 150 plants. Most buds are fit very closely.Item Velia and the Cilento, an Introduction(2013) Almon, ClopperMaterial for students in a Study Abroad course beginning in Ascea, near Velia, in Southern Italy. It begins with the geological evolution of the Mediterranean and moves on to the prehistory of the area, the coming of the Greeks, the settlement of Elea = Velia, the Eleatic philosophers, the area in Roman times, and history up to the present, with special attention to the Consorzio Velia, which provides water to the area.Item Scientific Programming with Borland C++ Builder and Codegear's Turbo C++(2008) Almon, ClopperThis tutorial explains the use of Borland C++ Builder and Codegear Turbo C++ for writing Graphical User Interfaces for Windows for scientific, number-crunching applications. Drawing graphs and making help files are explained with examples.Item A Brief Guide to C and C++ for Fortran or Basic Programmers(1999) Almon, ClopperThis paper introduces C and C++ programming for learners who already have some experience in another language such as Fortran or Basic. It explains basic syntax, dynamic space allocation, structures, classes, constructors and destructors, and overloading of operators. All concepts are illustrated with working programs.Item Unions, Bargaining and Strikes(Edward Elgar, 2002-08-25) Cramton, Peter; Tracy, JosephItem The Distributional Effects of Carbon Regulation(Edward Elgar, 1999) Cramton, Paul A.Item Nonrandom Mixing Models of HIV Transmission(Springer-Verlag, 1989) Kaplan, Edward H.; Cramton, Peter; Paltiel, A. DavidModels of HIV transmission and the AIDS epidemic generally assume random mixing among those infected with HIV and those who are not. For sexually transmitted HIV, this implies that individuals select sex partners without regard to attributes such as familiarity, attractiveness, or risk of infection. This paper formulates a model for examining the impact of nonrandom mixing on HIV transmission. We present threshold conditions that determine when HIV epidemics can occur within the framework of this model. Nonrandom mixing is introduced by assuming that sexually active individuals select sex partners to minimize the risk of infection. In addition to variability in risky sex rates, some versions of our model allow for error (or noise) in information exchanged between prospective partners. We investigate several models including random partner selection (or proportionate mixing), segregation of the population by risky sex rates, a probabilistic combination of segregation and random selection induced by imperfect information (or preferred mixing), and a model of costly search with perfect information. We develop examples which show that nonrandom mixing can lead to epidemics that are more severe or less severe than random mixing. For reasonable parameter choices describing the AIDS epidemic, however, the results suggest that random mixing models overstate the number of HIV infections that will occur.Item Collusive Bidding: Lessons from the FCC Spectrum Auctions(Springer-Verlag, 2000-05) Cramton, Peter; Schwartz, Jesse A.The Federal Communications Commission (FCC) spectrum auctions use a simultaneous ascending auction design. Bidders bid on numerous communication licenses simultaneously, with bidding remaining open on all licenses until no bidder is willing to bid higher on any license. With full revelation of bidding information, simultaneous open bidding allows bidders to send messages to their rivals, telling them on which licenses to bid and which to avoid. These strategies can help bidders coordinate a division of the licenses, and enforce the proposed division by directed punishments. We examine solutions to mitigate collusive bidding in the spectrum auctions, and then apply these ideas to the design of daily electricity auctions.Item Vickrey Auctions with Reserve Pricing(Springer-Verlag, 2004-04) Ausubel, Lawrence M.; Cramton, PeterWe generalize the Vickrey auction to allow for reserve pricing in a multi-unit auction with interdependent values. In the Vickrey auction with reserve pricing, the seller determines the quantity to be made available as a function of the bidders’ reports of private information, and then efficiently allocates this quantity among the bidders. Truthful bidding is a dominant strategy with private values and an ex post equilibrium with interdependent values. If the auction is followed by resale, then truthful bidding remains an equilibrium in the auction-plus-resale game. In settings with perfect resale, the Vickrey auction with reserve pricing maximizes seller revenues.