Demand-side Effects Research Articles

Consequences of platforms' remuneration models for digital content: initial evidence and a research agenda for streaming services

Nowadays, platforms in many industries offer content for a (monthly) flat rate (e.g., music streaming). While flat rates are efficient in reducing transaction costs for administering customers, platforms’ rules for remunerating content right holders are crucial for royalty allocation and, as a result, heavily discussed in several industries. The music industry’s business practices could be on the verge of their next disruption. There is an ongoing heated debate with respect to how the income of flat rates through streaming services should be allocated to right holders (labels and artists). This research investigates aspects of the supply and demand side effects as well as the resulting monetary consequences of changing the currently applied proportional-to-usage remuneration policy (pro rata) to a user-centric policy. Using individual-level data from 3,326 participants and data from Spotify’s API, we empirically quantify the monetary consequences of this change for the music industry. Depending on the remuneration system, we find a substantial reallocation of nearly 170 million € per year at Spotify. We discuss demand and supply-side consequences that may change the way music is currently produced and consumed. We conclude with a research agenda on the impact of business conventions for users, platforms, and artists in the music streaming industry.

Promoter ownership and bankruptcy reforms: evidence from India

PurposeThe demand-side view of creditor rights posits a negative association between creditor rights and corporate borrowings. The purpose of this paper is as follows: first, the author examines whether the demand-side effect is more pronounced amongst firms with excess promoter shareholding. Subsequently, the authors analyze the impact of high promoter holdings on investment decisions owing to bankruptcy reforms.Design/methodology/approachTo answer the above questions, the authors exploit the passage of the Insolvency and Bankruptcy Code (IBC) (2016) that strengthens the creditor rights of lenders, which impacts the borrowings and financing activities of Indian corporates. Using a panel of listed Indian firms over the period of 2012–2019, the authors analyze how the IBC affects firms’ borrowings and financing decisions with excess promoter holdings.FindingsThe authors find that bankruptcy reforms led to a statistically significant decline in the use of borrowed funds (primarily secured and long-term debt) by firms with high concentrated holdings. The analysis also indicates that firms with excess promoter ownership face an increased cost of debt due to bankruptcy reforms. As a result, firms with excess promoter holdings curtail their investments. Overall, the results indicate that India’s bankruptcy reforms significantly affect the firms’ financing and investment decisions with highly concentrated ownership.Originality/valueWhile past research has explored the relationship between bankruptcy reforms and demand for/supply of debt, the authors provide novel empirical evidence on the role of promoter holdings that affects the relationship between bankruptcy law and financing and investment decisions. To the best of the author’s knowledge, this study is the first to investigate the role of ownership structure in the context of bankruptcy reforms by using a quasi-natural experiment.

Demand without supply? Mass partisanship, ideological attachments, and the puzzle of Guatemala's electoral market failure

The demand for an ideologically based party system is not always met with a supply. As a country where a large majority of adults identify on the ideological scale but whose weak political parties primarily function as short-lived personalist platforms, Guatemala represents an extreme case of a demand supply mismatch. Using six AmericasBarometer surveys from 2008 to 2018, we analyze the supply-side (partisanship) and demand-side (ideological identification) effect on voter turnout to identify whether the manifestation of this market failure applies evenly to voters across the ideological scale. We report a nuanced outcome: partisanship and identification on the right of the ideological scale increase turnout, but identification on the center or the left display no significant effect. The absence of parties that effectively represents left-wing or centrist voters—or that at least induce them to turn out to vote—points to a supply-side problem in Guatemala's political representation market.

Infrastructure investment and employment: Evidence for Portugal

We estimated how investment in 12 infrastructure types affects employment in Portugal. Using a vector-autoregressive specification at the industry level, we found a double dividend associated with ports and airports: investing in either delivers the greatest bang per euro, both on impact and in the long run. One million euros invested in ports and airports creates 717.1 and 290.5 jobs in the long run, respectively, and 535 and 253.3 jobs in the short run, respectively. Regarding long-term employment effects, these are followed by municipal roads, telecommunications, national roads, health structures, education facilities, refineries, railroads, and highways. Water infrastructures and electricity and gas infrastructures have negligible effects. With the long-term effects decomposed, sizable supply-side employment effects for health and education facilities exist, while demand-side effects dominate for airports, ports, municipal roads, and telecommunications. Employment following the investment in national roads is balanced across demand and supply channels. We found no significant employment-related location effects of infrastructure investments. Also, investing in either health facilities or in education buildings entails non-negligible job losses in the short run. These results suggest that the magnitude and the timing of job creation crucially depend on the type of infrastructure investment. Policymakers in Portugal need to be aware of this in choosing between countercyclical or structural targets.

Religiosity and risk taking: Is there a demand-side effect?

Religiosity may impact firm risk taking via its risk averse employees or through risk-sensitive demand. Using detailed financial statements of property-liability insurance companies, we find that both religiosity at firms' headquarters and the religiosity of firms' largest geographic market are negatively related to firm risk taking. For firms with one salient market, the impact of market religiosity is approximately the same order of magnitude as headquarter religiosity. Our evidence suggests that firm risk taking is influenced by customer demand.

Drivers of Global Trade: A Product-Level Investigation

This paper investigates the drivers of global trade at the six-digit product level. The identification is achieved first by estimating the log-linear product-level bilateral trade implications of a model and second by aggregating the fitted estimation results across bilateral countries using Taylor series to obtain global measures in levels for each product. The empirical results suggest that supply-side effects (capturing production or exporting costs in source countries) contribute to changes in global trade more than six times the demand-side effects (capturing economic activity or preferences in destination countries) and more than ten times the effects of bilateral trade costs (capturing bilateral protectionism measures). Several product-level implications follow.

Political (Over)Representation of Public Sector Employees and the Double-Motive Hypothesis: Evidence from Norwegian Register Data (2007–2019)

Abstract Countries have widely diverging regulations regarding the eligibility of public sector employees for political office, and the stringency of such regulations remains fiercely debated. Building on a demand and supply model of political selection, this article contributes to such debates by studying whether and how the incentives of public employees as both consumers and producers of public services (their “double motive”) affects their descriptive political representation. Our analysis employs population-wide individual-level register data covering four Norwegian local elections between 2007 and 2019 (N > 13 million observations). Using predominantly individual-level panel regression models, we find that public employees are strongly overrepresented on election lists and have a higher probability of election (conditional on running). Looking at underlying mechanisms, we provide evidence consistent with the “double motive” of public employees inducing their self-selection into standing for elected office (at higher-ranked ballot positions). Demand-side effects deriving from party and voter selection receive more limited empirical support. We discuss ensuing concerns about the potential substantive representation of policy self-interests by elected public employees.

Drivers of Global Trade: A Sector-Level Investigation

This paper investigates the drivers of global trade at the six-digit product level. The identification is achieved first by estimating the log-linear product-level bilateral trade implications of a model and second by aggregating the fitted estimation results across bilateral countries using Taylor series to obtain global measures in levels for each product. The empirical results suggest that supply-side effects (capturing production or exporting costs in source countries) contribute to changes in global trade more than six times the demand-side effects (capturing economic activity or preferences in destination countries) and more than ten times the effects of bilateral trade costs (capturing bilateral protectionism measures). Several product-level implications follow.

Coronavirus, macroeconomy, and forests: What likely impacts?

Much uncertainty persists about how the coronavirus (COVID-19) and its derived crisis effects will impact both the economy and forests. Here we conceptualize a recursive model where an initial COVID-19 supply-side shock hits first the Global North that, mediated by country-specific epidemic management strategies and other (fiscal, monetary, trade) policy responses feeds through to financial markets and the real economy. Analytically we distinguish two stylized scenarios: an optimistic V-shaped recovery where effective policy responses render most economic damages transitory, versus a pessimistic pathway of economic depression, where short-run pandemic impacts are dwarfed by the subsequent economic breakdown. Economic impacts are transitioned from the global North to the South through trade, tourism, remittances and investment/capital flows. As for impacts on tropical forests, we compare the effects of past economic crises to early indicators for incipient trends. We find national income and commodity price effects to be torn between three forces: a contractive-inflationary supply-side shock, deflationary pandemic demand-side effects, and expansive-inflationary monetary and fiscal policy responses. We discuss how global forest outcomes will depend on how these macroeconomic battles are resolved, but also on geographical differences in deforestation dynamics. Reviewing recent fire and deforestation alerts data, as well as annual tree-cover loss data, we find that deforestation-curbing and -enhancing factors so far just about neutralized each other. Yet, country impacts vary greatly. Changing macroeconomic scenarios, such as fading out of huge economic stimulus packages, could change the picture significantly, in line with what our model predicts.

Rating the composition: Deconstructing the demand-side effects on transit use changes in California

Transit use in the U.S. has been sliding since 2014, well before the onset of the COVID-19 pandemic. The largest state, California, was also losing transit riders despite substantial public investment and increased service in the pre-pandemic period. This downturn prompted concern among transit managers and planners interested in service-side interventions to reverse the decline. However, relatively little is known about changes in the demand for public transit and how shifts in demand-side factors have affected patronage. Drawing on California data from the 2009 and 2017 National Household Travel Surveys, we quantify demand-side changes as a function of two factors—changes in ridership rates of various classes of transit riders (“rate effects”) and changes in the composition of those rider classes (“composition effects”). Statewide, we find that while shifts in the population composition were in some cases associated with lower levels of ridership, the largest declines in transit patronage were associated with falling ridership rates. Specifically, those with limited automobile access and Hispanic travelers rode transit far less frequently in 2017 compared to 2009. Transit ridership rates and rider composition in the San Francisco Bay Area were relatively stable during the study period, while both rate and compositional changes in the Los Angeles area were associated with much lower levels of total ridership. Overall, our findings demonstrate the important role of demand-side factors in understanding aggregate transit use, and suggest that planners and managers may have limited policy tools at their disposal when seeking to bolster ridership levels.

Investment in OECD Countries: a Primer

Aggregate business investment is a major driver of long-term economic growth. It has been weak in many advanced economies over the last decade, partly due to cyclical demand-side effects. Nevertheless, a number of structural factors and policies interact with and have an effect on business investment. This paper provides a survey of the literature on the main policy drivers of business investment such as finance (including bank and market finance, venture capital and the debt bias in corporate taxation), tax policies, foreign direct investment, product and labour market and environmental regulations, the importance of an efficient insolvency regime, the negative impact of (regulatory) uncertainty and the role of infrastructure investment as a support for business investment.

Military Spending and Employment

ABSTRACT This paper constructs a theoretical model involving supply-side effect, demand-side effect, and security effect produced by military spending to explore the effects of military spending and foreign military threat on employment. This paper proves that the relationship between defense burden and employment is nonlinear (i.e., reverse U shape.). Hence, we find the defense burden of maximizing employment. In addition, we argue that a rise in foreign military threat will be detrimental to the level of output and in turn lead to a reduction in employment. Finally, we show that an increase in the variance of the foreign military spending shocks will raise the level of output and then lead to an increase in employment.

Supply- and Demand-Side Effects in Performance Appraisals: The Role of Gender and Race

Supply- and Demand-Side Effects in Performance Appraisals: The Role of Gender and Race

A comparative study of ultrasound-guided transversus abdominis plane block with local anesthetic infiltration in inguinal hernia repair: A prospective randomized study

Background: Transversus abdominis plane (TAP) block is a relatively newer block that provides analgesia to the parietal peritoneum, skin and muscles of the anterior abdominal wall. Aims: To determine the effectiveness of the TAP block over wound infiltration for hernia repair. Settings and Design: Randomized, double-blinded, prospective study in an academic teaching hospital. Methods: Sixty patients were divided into two groups of 30 each. In Group T, patients received ultrasound-guided TAP block for inguinal hernia repair whereas in Group I, local anesthetic infiltration at the wound site was done. Primary outcome measure was pain relief as assessed by a numeric rating scale (NRS) whereas secondary outcome measures were duration (from the time at which TAP block or local anesthetic infiltration is given to the time at which patient first requests for rescue analgesic) of post-operative analgesia, patient satisfaction score, and complications, if any. Results: Mean NRS score at 0hr for a group I was 0.88±0.74 and for group T was 0.68±0.70 with a p-value of 0.28 and the mean NRS score at 24hr for the group I was 4.47±0.66 and for group T was 4.54±0.62 with a p-value of 0.68 but at 2hr, 6hr and 12hr, the NRS was significantly more in group I (p < 0.05). Mean time of 1st analgesic request in group I was 403.73 minutes as compared to group T where it was 711.33 mins (P<0.001). The post-operative nausea and vomiting (PONV) and sedation in group I was significantly more than group T. Conclusion: Ultrasound-guided TAP block provides better postoperative analgesia both in quality and duration. TAP block reduces the opioid demand and opioid-related side effects like sedation and postoperative nausea vomiting and thus, improves overall patient satisfaction.

Dominant Currencies and the Export Supply Channel

Dominant currency pricing (DCP) weakens the demand-side effects of exchange rate changes on exports (Gopinath et al., 2020). However, adjustment in the export sector can still occur through other supply-side channels. With bilateral trade data at the HS2-product level, panel fixed-effects regressions and an instrumental variables (IV) approach, this paper presents several novel findings: (1), a depreciation of an exporter’s currency against the US-dollar increases total export volumes between non-US countries, whereas bilateral exchange rates matter very little. (2), there is no statistically significant increase in average exports per firm (the intensive margin), while the aggregate export response is mainly driven by an increase in the number of exporting firms (the extensive margin). (3), there is substantial heterogeneity in the export response to exchange rates against dominant currencies. Market concentration, approximated by the Herfindahl-Hirschman Index (HHI), reduces the response of both the extensive and intensive margins to the US-dollar exchange rate. These results highlight an “export supply channel” of exchange rates in a world with dominant currencies, deepen our understanding of aggregate export adjustment and further underline the heterogeneous export response in different sectors to exchange rate changes. JEL Classification: F14, F31, F41

Net Buying Pressure and the Information in Bitcoin Option Trades

How do supply and demand from informed traders drive market prices of bitcoin options? Deribit options tick-level data supports the limits-to-arbitrage hypothesis about the market maker's supply. The main demand-side effects are that at-the-money option prices are largely driven by volatility traders and out-of-the-money options are simultaneously driven by volatility traders and those with proprietary information about the direction of future bitcoin price movements. The demand-side trading results contrast with prior studies on established options markets in the US and Asia, but we also show that Deribit is rapidly evolving into a more efficient channel for aggregating information from informed traders.

Economic Policy Uncertainty and Bank Stability

We examine the influence of economic policy uncertainty on bank stability post-2007-2008 global financial crisis. We rely on the economic policy uncertainty (EPU) index introduced by Baker et al. (2016). We use 176,477 quarterly observations for US commercial banks over the period from 2011Q1 to 2020Q3 and find consistent and robust evidence that bank stability decreases as the level of economic policy uncertainty increases. We specifically control for demand-side effects which indicates that the decrease in bank stability not only originates from borrowers’ and customers’ conditions but also from a change in bank behavior. A deeper investigation shows that the negative impact of policy uncertainty on bank stability is stronger for larger banks, and weaker for highly capitalized banks as well as for more liquid banks. Our findings have important implications particularly for the COVID-19 policy implementations.

Optimal Monetary Policy at the Zero Lower Bound on Nominal Interest Rates in a Cost Channel Economy

It has been widely debated what a central bank should do to stimulate the economy when the nominal interest rate is at the zero lower bound (ZLB). The optimal monetary policy literature suggests that monetary policy inertia, i.e., committing to continue a zero interest regime even after the ZLB is not binding, is a way to get the economy out of recession. In this paper, I examine whether this result holds when monetary policy has not only the conventional demandside effect but also a supply-side effect on the economy. To accomplish this objective, I incorporate the cost channel of monetary policy into an otherwise standard new Keynesian model and evaluate the optimal monetary policy at the ZLB. The study reveals several important insights in the conduct of the optimal monetary policy in a cost channel economy at the ZLB. Importantly, the discretionary policy requires central banks to keep interest rates at the ZLB for longer in a cost channel economy compared to no-cost channel economies. Further, cost channel economies introduce a policy trade-off between inflation and output gap. In contrast, under commitment policy, the simulation exercise shows that the central bank is able to terminate the zero interest rate regime earlier in a cost channel economy than otherwise. It is also revealed that the cost channel generates substantially high welfare losses, under both discretionary and commitment policies. Accordingly, abstracting the cost channel in these types of models can lead to under estimation of welfare losses.

Incentive-based integrated demand response for multiple energy carriers under complex uncertainties and double coupling effects

Incentive-based integrated demand response has been recognized as a power tool to mitigate supply-demand imbalance in integrated energy systems with high penetration of renewable energy resources. However, complex uncertainties including output uncertainty of renewable energy sources in supply side and responsiveness uncertainty of consumers in demand side and double coupling effects including energy conversion effect in multi-energy aggregator side and appliance coupling effect in consumer side have been a central challenge to design incentive strategies of integrated demand response programs. In this paper, considering the above two uncertainties and two coupling effects, an incentive-based integrated demand response model for multiple energy carriers is proposed. Besides, our model improves the conventional model of energy storage unit to cope with the balancing power deviation from both under-target response and over-target response. In addition, the applicability of integrated demand response is enhanced to be applicable to scenarios where both curtailment integrated demand response programs and absorbing integrated demand response programs are planned simultaneously by adding dynamic parameters. The model is formulated as a bi-level stochastic programming problem based on uncertain programming theory, and corresponding equivalent model is also given to solve the problem effectively. Finally, simulation results demonstrate that the proposed model can achieve a win-win situation between multi-energy aggregator and consumers, showing merits in decreasing the total costs and the risk costs of multi-energy aggregator and increasing the profits of consumers.

The (time-varying) Importance of Oil Prices to U.S. Stock Returns: A Tale of Two Beauty-Contests

We evaluate the probability that oil prices affect excess stock returns for U.S. listed firms. The probabilities are obtained from a time-varying multi-factor asset pricing framework estimated using dynamic model averaging techniques, including oil price information among several other possible risk factors. Two widely used oil price measures are considered, one based on raw oil price changes and another based on disentangling the source of oil price changes due to supply-side or demand-side effects. As far as we know our dataset, which comprises 10,118 stock price series with up to 25,372,588 observations between 1995-2018, is the most comprehensive used for this purpose. We develop two “beauty-contests” in which we estimate the multi-factor models separately for individual stocks, for each of the two oil price measures. The results suggests that, when working with daily data (beauty contest 1), oil price changes are a significant (important) determinant for around 1-3% of the sample. When using oil price shocks-as opposed to oil price changes-(beauty contest 2) this percentage increases to 27-45%, suggesting that oil supply and demand shocks (as opposed to oil price changes) can better explain firm-level excess returns, at least for monthly frequency data where such a decomposition is available. We provide evidence that the increase in percentage is only partially attributable to data-frequency, and more likely attributed to the decomposition into supply/demand driven oil price changes. We reconcile differences between our findings and those reported in previous literature on the basis of the fully dynamic nature of our adopted methodology.