Empirical Economic Research Research Articles

Social Learning in Economics

Social learning is a rapidly growing field for empirical and theoretical research in economics. We encounter social learning in many economically important phenomena, such as the adoption of new products and technologies or job search in labor markets. We review the existing empirical and theoretical literatures and argue that they have evolved largely independently of each other. This suggests several directions for future research that can help bridge the gap between both literatures. For example, the theory literature has come up with several models of social learning, ranging from naïve DeGroot models to sophisticated Bayesian models whose assumptions and predictions need to be empirically tested. Alternatively, empiricists have often observed that social learning is more localized than existing theory models assume, and that information can decay along a transmission path. Incorporating these findings into our models might require theorists to look beyond asymptotic convergence in social learning.

How do Writers Evaluate their Own Empirical Research? A Genre-based Inquiry into Economics Journal Papers

Genre literature has indicated that academic discourse communities commonly uphold established conventions with regard to the writing of research articles in their respective disciplines. Recent studies have also acknowledged that disciplinary differences exist in the writing of research articles, and this has resulted in numerous investigations into the specific genre features of this text type in various academic fields. An interesting area which has been identified in past research is a rhetorical move that evaluates the study being reported. To date, however, this move on self-evaluation has not been examined at length in a core academic discipline such as economics. Using the latest Swalesian move-step analytical framework, this study aims to analyse the communicative functions of this move in empirical economics research articles and identify its constituent steps. The textual analysis of this investigation was triangulated by a qualitative analysis of spoken data elicited from specialist informants in the field of economics. Our results indicate that self-evaluation of a study is, by and large, a principal or quasi-obligatory move although each of its three steps is optional in economics research reports. These three constituent steps collectively play a pivotal role in putting the research into perspective for the reader after research results are presented. The findings of this study have contributed to the advancement of genre knowledge in that they have shed some light on how instructors can design relevant teaching materials aimed at helping learners to foreground the value of their studies in the later portions of their research reports.

The Measurement of Household Consumption Expenditures

Household-level data on consumer expenditures underpin a wide range of empirical research in modern economics, spanning micro- and macroeconomics. This research includes work on consumption and saving, on poverty and inequality, and on risk sharing and insurance. We review different ways in which such data can be collected or captured: traditional detailed budget surveys, less onerous survey procedures that might be included in more general surveys, and administrative or process data. We discuss the advantages and difficulties of each approach and suggest directions for future investigation.

The role of homo oeconomicus in the political economy of James Buchanan

Whenever the economic model of behavior is to be applied, the utility function has—at least somewhat—to be specified. Buchanan generally prefers to apply a rather narrow version. However, he acknowledges that it is hardly possible to explain actual behavior of individuals with such a version, so in performing empirical economic research he accepts that we have to use a more open one. He also acknowledges that people might behave differently in markets than they do in politics; other-regarding behavior might be more pronounced in politics as compared to markets. Which version should be applied in constitutional economics, however, is a different question. Following a long ongoing tradition in political philosophy, he insists that—for methodological reasons—the narrow version is the correct one to be applied; this is the way to compare different sets of rules when analyzing the possible abuse of power by rulers in order to prevent it as far as possible. The same should also be taken into account when analyzing the process of policy advice. The narrow homo oeconomicus model should, however, not be misunderstood as a normative prescription.

Hysteresis Effects in Economics Different Methods for Describing Economic Path-Dependence

Relations between economic variables are often characterized by a situation where initial conditions and the past realizations of economic variables matter. I.e. past (transient) exogenous disturbances and past states of the economic system do have an influence on the current economic relations. Typical examples are the dynamics of (un)employment in business cycles and the dynamics of the nexus of exchange rate and exports. Since the standard characteristics of hysteresis apply – i.e. permanent effects of a temporary stimulus, resulting in path-dependent multiple equilibria – these economic phenomena are correctly titled as “hysteresis”. Empirical research in economics is using different methods in order to capture path-dependent effects. First econometric approaches tried to describe these effects by simple timeseries processes with unit- (or zero)-root dynamics. However, since unit-root-dynamics are not related to genuine multiple equilibria but on the order of integration of the time series, these first attempts were expanded by more sophisticated time-series models integrating structural breaks, threshold-cointegration or non-linear autoregressive distributed lag-models. Another branch of empirical studies tries to keep closer to the original concept of the macroloop, trying to apply an explicit Mayergoyz/ Preisach aggregation procedure for heterogeneous firms – if microeconomic information is available based on panel-data – or by using simple algorithms analogous to mechanical-play in order to apply simple OLS-regression methods on a filtered/transformed input-output relation. In this paper, we give an overview of the implementation of hysteresis in economics, with an emphasis on two aspects: (1) the differentiation between micro- and macroeconomic hysteresis including an outline of an adequate aggregation procedure, and (2) different methods applied in econometrics in order to capture economic path-dependency empirically.

Ex-Post Merger Review and Divestitures

This dissertation consists of four papers in structural empirics that can be broadly categorized into two areas. The first three papers revolve around the structural estimation of demand for differentiated products and several applications thereof (Berry (1994), Berry, Levinsohn and Pakes (1995), Nevo (2000)), while the fourth paper examines the U.S. Treasury yield curve by estimating yields as linear functions of observable state variables (Ang and Piazzesi (2003), Ang et al. (2006)).The central focus of each paper are the underlying economics. Nevertheless, all papers share a common empirical approach. Be it prices of beers in Sweden or yields of U.S. Treasury bonds, it is assumed throughout that the economic variables of interest can be modeled by imposing specific parametric functional forms. The underlying structural parameters are then consistently estimated based on the variation in available data.Consistent estimation naturally hinges on the assumption that the assumed functional forms are correct. Another way of viewing this is that the imposed functions are flexible enough not to impose restrictive patterns on the data that ultimately lead to biased estimates of the structural parameters and thereby produce misleading conclusions regarding the underlying economics.In principle, the danger of misspecification could therefore be avoided by adopting sufficiently flexible functional forms. This, however, typically requires the estimation of a growing number of structural parameters that determine the underlying economic relationships. As an example, we can think of the estimation of differentiated product demand. The key object of interest here is the substitution patterns between the products. That is, we are interested in what happens to the demand of good X and all its rival products, as the price of good X increases. With N products in total, we could collect the product-specific changes in demand in a vector with N entries. It is also possible, however, that the price of any other good Y changes and thereby alters the demands for the remaining varieties. Thus, in total, we are interested in N2 price effects on product-specific demand. With few products, these effects could be estimated directly and the risk of functional misspecification could be excluded (Goolsbee and Petrin (2004)). With 100 products, however, we are required to estimate 10,000 parameters, which rarely, if ever, is feasible. This is the curse of dimensionality.Each estimation method employed in the four papers breaks this curse by imposing functions that depend on relatively few parameters and thereby tries to strike a balance between the necessity to rely on parsimonious structural frameworks and the risk of misspecification. This is a fundamental feature of empirical research in economics that makes it both interesting and challenging.

Do Measures of Financial Constraints Measure Financial Constraints?

Financial constraints are fundamental to empirical research in finance and economics. We propose two tests to evaluate how well measures of financial constraints actually capture constraints. We find that firms typically classified as constrained do not in fact behave as if they were constrained: they have no trouble raising debt when their demand for debt increases exogenously and they use the proceeds of equity issues to increase payouts to shareholders. Our evidence suggests that extant findings that have been attributed to constraints may instead reflect differences in the growth and financing policies of firms at different stages of their lifecycles.

LOYAL OR LOCKED-IN--AND WHY SHOULD WE CARE?

Consumer switching costs confer market power on firms. This is verified by the strands of theoretical and empirical research in economics. However, switching costs arise from a number of different sources. This article shows that the composition of the total switching costs, although acknowledged, has been of secondary importance to economic research when it comes to the use of the concept as a hypernym. This is a challenge to antitrust analysis, in which the origin of switching costs may be decisive with respect to whether observed rigidity in market dynamics needs to be dealt with in the first place. A recognition and evaluation of the different sources of switching costs matter in antitrust analysis, and may reveal the adherence to specific doctrines of economics. This article proposes a typology of switching costs that enables a systematic and eclectic approach to analyzing the role of switching costs as a source of market power or as an impediment to consumer choice. The approach can gain antitrust enforcement, competition advocacy, and the implementation of consumer protection policies.

Introduction

Introduction

Dvije paradigme objašnjenja kognitivnih pristranosti u odlučivanju: "bihevioralna ekonomija" i "ekološka racionalnost"

In this paper the authors review a variety of empirical findings, research directions and tenets of two paradigms in heuristics and bias research: of behavioral economics (following Kahneman and Tversky's findings), and of the less-is-more, i.e. ecological rationality research (which follows findings by G. Gigerenzer). While explaining empirical research in behavioral economics (BE), the authors describe a classical economic model of rationality, the rational choice theory, which is contradicted by results in behavioral economics. BE researchers use rational choice theory as a norm, so their findings are typically explained or documented by insufficient adjustment to, or by a bias from the rational norm. The second paradigm, however typically documents sufficiently good decisions made while using simple, frugal and smart heuristics, such as take-the- -best. It claims that irrationality in decision-making stems from the inappropriate application of the given heuristics in ecologically unsuitable situations.

Regional investment under uncertain costs of location

Due to political and economic integration, firms face increasing opportunities for locating their activities in countries, regions and cities that provide the best business environment for their specific needs. In our study, we focus on the impact of economic risk and risk preferences upon regional allocation of capital investments. The source of risk stems from the difference in costs of location and the business cycle across regions. Firms are seeking ways to reduce their exposure of regional shocks. As a result, regional concentration of investment of capital is endogenous. A comparative static analysis shows that regional capital allocation depends upon the firm’s risk preferences. Our findings demonstrate the suitability of the two-moment approach with multiple risks as an alternative to the expected utility approach. The impact of changes in distribution parameters, such as the expected costs of location, the variance of costs of location and the correlation between locational costs (or the business cycle), can be fully characterized by the elasticity of risk aversion. Elements of risk preferences beyond risk aversion prove to be important to evaluate regional policies. This insight is of interest for empirical research in regional economics.

Daten des IAB-Betriebspanels und Firmenpaneldaten aus Erhebungen der Amtlichen Statistik – substitutive oder komplementäre Inputs für die Empirische Wirtschaftsforschung?

Representative longitudinal data for German firms (establishments or enterprises) that can be used for scientific analyses are mainly from two sources, the IAB Establishment Panel and the AFiD-Panel based on surveys performed by the Statistical Offices. This paper compares the data from these two sources. It is argued that the two types of firm data are complements and not substitutes for empirical economic analyses. Both have specific strengths and weaknesses, and both are well suited to investigate some but not all topics, and some topics cannot be analyzed with one type of data at all. Therefore, both types of data are needed as inputs for empirical economic research.

TECHNOLOGY POLICY AND CLIMATE CHANGE

There is a strong foundation in theoretical and empirical research in economics for the proposition that efficient climate policy must include both carbon-price policy and technology policy. Even the most modest projections of Greenhouse Gas (GHG) reductions needed to moderate climate change imply very large reductions in the carbon-intensity of the world economy, something in excess of a 60% reduction by 2050. This is a greater proportionate reduction than has occurred in the petroleum intensity of world GDP since 1970, despite a six-fold increase in the price of oil. This illustrates how unlikely it is that the needed economic transformation could be brought about by price-based policy instruments alone. There is no good historical analogue to the needed transformation, but the closest parallels all involved major roles for technology policy. Increased public funding of research and training is a necessary but not sufficient component of such policy. Historical experience with technological transformation in other sectors suggests that government support for purchases of low-carbon technologies will be needed. Unfortunately, we do not have good evidence on efficient design of such programs. We need systematic evaluation of different policy instruments designed to accelerate the transformation of basic technologies into large-scale commercial products. We have the "technology" to do this kind of systematic evaluation, but it is not generally used.

The Trade Unit Values database

Résumé Les analyses empiriques en économie internationale utilisent généralement les valeurs unitaires pour approximer les prix des produits échangés. Les bases de données de valeurs unitaires existantes présentent certains biais statistiques, liés à l’agrégation et à l’harmonisation des valeurs unitaires. Ces différents biais limitent fortement la fiabilité des données de valeurs unitaires en tant que proxy des prix du commerce. Ce papier présente la nouvelle base de données Trade Unit Value du CEPII, qui a pour objectif de fournir des données de valeurs unitaires fiables et désagrégées pour la plupart des pays du monde. Les valeurs unitaires bilatérales sont calculées à un niveau de désagrégation des produits extrêmement fin avant d’être agrégées au niveau 6 digits de la nomenclature harmonisée. Les valeurs unitaires de la base Trade Unit Value présentent une plus forte dispersion par catégorie de produit que celles des autres bases de données mondiales existantes. L’estimation d’une équation de gravité standard montre que cette plus forte dispersion s’explique par les agrégats économiques. Classification JEL : E3 ; F1 ; F4.

Migration and Trade

AbstractTheoretical and empirical research in economics suggests that bilateral migration triggers bilateral trade through a number of channels. This paper assesses the functional form of the impact of migration on trade flows in a quasi‐experimental setting. We provide evidence that the relationship is not log‐linear. In particular, at small levels of immigration (stocks) the elasticity of trade to migration is quite high, and it declines to zero at about 4,000 immigrants. If immigration stocks exceed such a level, the evidence suggests that trade will not increase anymore. This suggests that for cross‐country network and other effects flowing from immigration to materialise at a significant level for trade, a high‐enough level of immigrant stocks is necessary. But there appears to be satiation as immigrant numbers increase.

Faculty Perceptions of Grades: Results from a National Survey of Economics Faculty

Results from a survey of U.S. economics faculty (816 responses) indicate the extent to which grades are emphasised in their classes. We measure learning- and grade-orientations and relate our findings to empirical research in economics and educational psychology. We find agreement among economics faculty on a broad range of grade-oriented attitudes and behaviours. We note differences between views of economics faculty and empirical research on several key topics. Free-form comments indicate a concern with grade distributions, the influence of grades on student evaluations of teaching, and grade inflation.

Regional Investment Under Uncertain Costs of Location

Due to globalization competitive firms face increasing economic opportunities for locating their activities in countries, regions and cities that provide the best business environment for their specific needs. In our study we focus on the impact of economic risk and risk preferences upon regional allocation of investments. The source of risk stems from the difference in stochastic costs of location across regions. A comparative static analysis shows that capital allocation depends upon the firms' risk preferences. As a result regional agglomeration of investments may occur although the objective of the regional policy is aimed at the opposite. Our findings demonstrate the suitability of the two-moment approach as an alternative to the expected utility approach. The impact of changes in distribution parameters, such as the expected costs of location, the variance of costs of location and the correlation between locational costs, can be fully characterized via the elasticity of risk aversion. Elements of risk preferences beyond risk aversion prove to be very important to evaluate regional politics. This insight is of interest for empirical research in regional economics.

The Cult of Statistical Significance – What Economists Should and Should Not Do to Make their Data Talk

Abstract This article takes issue with a rather devastating critique of statistical significance testing propagated in a recent book by Ziliak/McCloskey (2008) of the same title. Ziliak/McCloskey argue that statistical significance testing is a barrier rather than a booster for empirical research in economics and should therefore be abandoned altogether. The present article argues that this is good advice in some research areas but not in others, with the aim of making practitioners aware of various fallacies connected with the concept of statistical significance, and at the same time showing where significance testing is most fruitfully employed. Taking all issues which have appeared so far of the German Economic Review and a recent epidemiological meta-analysis as examples, the present paper shows that there has indeed been a lot of misleading work where confirmatory significance testing has played a major role, and that at the same time many promising avenues, best summarized under the heading “specifi...

Transaction costs detailed: single‐industry studies and operationalization

PurposeThis paper aims to present an in‐depth review on the latest state of empirical research in transaction cost economics (TCE), focusing on single‐industry studies. The intensely discussed subject of operationalization of transaction costs is critically assessed, and a concept of how to increase the quality of findings in empirical studies is presented.Design/methodology/approachThe sample was obtained by a literature research and review in high‐class media and submitted to in‐depth quantitative and qualitative analysis such as content analysis.FindingsThe findings are in part unexpected and substantially contribute to research: applicability of TCE to a broad range of industries is found, the majority being large industries with important markets. Most studies support TCE statements, some suggesting theory extension by complementary aspects. Operationalization of transaction costs remains a field requiring further research.Research limitations/implicationsFirst, this article is condensed and therefore limited to single‐industry studies within TCE, understanding “industry” as a specialized field of activity. The question of industry boundaries may be a base for future research. Second, the subject of operationalization of transaction costs still requires further research.Practical implicationsDecision makers can continue to use TCE for various applications such as strategic alliance, vertical integration, governance choice, make‐or‐buy or contract choice questions. A shortcoming in most articles reviewed is the presentation of the industry's characteristics. Authors need to consider them in order to increase the qualitative level of single‐industry studies.Originality/valueThis paper provides significant insight into the field of single‐industry TCE studies. As a result of penetrating research in high‐class media and in‐depth analysis, the paper provides highly structured and intensely examined statements on existing literature and related findings, which support TCE statements and will lead current disputes in the literature to a further stage.

The Cult of Statistical Signi ficance - What Economists Should and Should Not Do To Make Their Data Talk

This article takes issue with a recent book by Ziliak and McCloskey (2008) of the same title. Ziliak and McCloskey argue that statistical significance testing is a barrier rather than a booster for empirical research in economics and should therefore be abandoned altogether. The present article argues that this is good advice in some research areas but not in others. Taking all issues which have appeared so far of the German Economic Review and a recent epidemiological meta-analysis as examples, it shows that there has indeed been a lot of misleading work in the context of significance testing, and that at the same time many promising avenues for fruitfully employing statistical significance tests, disregarded by Ziliak and McCloskey, have not been used.