Endogenous Selection Research Articles

Home Country Work Experience and Immigrant Self-Employment in the United States

Immigrant entrepreneurship in the United States has grown steadily in the last four decades. In this paper, I study the occupational choices of legal permanent residents and their associated earnings in paid and self-employment. Using a unique data set with pre- and postmigration individual-level information, I analyze the role of home country work experience of immigrants in their probability of becoming entrepreneurs and their earnings after migration. To control for endogenous sector selection in the estimation of earnings distributions, I follow a novel identification strategy based on extremal quantile regressions that does not require exclusion restrictions or a large support variable. I find that foreign work experience in paid and self-employment is an important predictor of entrepreneurship after migration. In addition, it impacts earnings in the United States but differently across sectors, controlling for human capital, assimilation, time, region of origin, U.S. destination, previous migratory status, and demographic characteristics. Overall, my results highlight the role played by immigrants’ labor market history from their home countries to better understand their outcomes in the United States.

Multistep allelic conversion in mouse pre-implantation embryos by AAV vectors

Site-specific recombinases (SSRs) are critical for achieving precise spatiotemporal control of engineered alleles. These enzymes play a key role in facilitating the deletion or inversion of loci flanked by recombination sites, resulting in the activation or repression of endogenous genes, selection markers or reporter elements. However, multiple recombination in complex alleles can be laborious. To address this, a new and efficient method using AAV vectors has been developed to simplify the conversion of systems based on Cre, FLP, Dre and Vika recombinases. In this study, we present an effective method for ex vivo allele conversion using Cre, FLP (flippase), Dre, and Vika recombinases, employing adeno-associated viruses (AAV) as delivery vectors. AAVs enable efficient allele conversion with minimal toxicity in a reporter mouse line. Moreover, AAVs facilitate sequential allele conversion, essential for fully converting alleles with multiple recombination sites, typically found in conditional knockout mouse models. While simple allele conversions show a 100% efficiency rate, complex multiple conversions consistently achieve an 80% conversion rate. Overall, this strategy markedly reduces the need for animals and significantly speeds up the process of allele conversion, representing a significant improvement in genome engineering techniques.

Misallocation under Trade Liberalization

This paper formalizes a classic idea that in second-best environments trade can induce welfare losses: incremental income losses from distortions can outweigh trade gains. In a Melitz model with distortionary taxes, we derive sufficient statistics for welfare gains/losses and show departures from the efficient case (Arkolakis, Costinot, and Rodríguez-Clare 2012) can be captured by the gap between an input and output share and domestic extensive margin elasticities. The loss reflects an endogenous selection of more subsidized firms into exporting. Using Chinese manufacturing data in 2005 and model-inferred firm-level distortions, we demonstrate that a sizable negative fiscal externality can potentially offset conventional gains. (JEL D22, F14, H25, L60, O19, P31, P33)

Worker productivity during Covid-19 and adaptation to working from home

We examine workers’ reported productivity, which we validate against external metrics, over the course of the Covid-19 pandemic. On average, workers report being at least as productive as before the pandemic’s onset. However, this average masks substantial heterogeneity, which is linked to job quality, gender, the presence of children, and ease of working from home. As the pandemic progressed, those who previously performed well at home were more likely to remain there. Building on these findings, we estimate factors affecting productivity outcomes across locations controlling for endogenous selection. We find that those in ‘good’ jobs (with managerial duties and working for large firms) were advantaged specifically in the home environment. More generally we find an effect of key personality traits – agreeableness and conscientiousness – on productivity outcomes across locations.

Relationship between hukou conversion and psychological integration of rural older migrants: the mediating effect of accessibility to health resources

ObjectiveThis study investigates the relationship between hukou conversion and the psychological integration of rural older migrants, exploring the mediating role of accessibility to health resources.MethodsThe 3,963 valid samples of rural older migrants included in the study were sourced from the 2017 China Migrants Dynamic Survey (CMDS). The study established a multiple linear regression model for estimation and utilized inverse probability-weighted regression adjustment (IPWRA) method to correct for the selection bias of hukou conversion.ResultsCompared to older migrants with rural hukou, merit-based (β = 0.384, 95% CI: 0.265 to 0.504), family-based (β = 0.371, 95% CI: 0.178 to 0.565) and policy-based (β = 0.306, 95% CI: 0.124 to 0.487) converters have significantly higher psychological integration. These findings remain robust even after addressing the potential issue of endogenous selection bias using the IPWRA method. Bootstrap mediating effect tests indicate that hukou conversion can indirectly affect psychological integration through the mediator role of health resources accessibility.ConclusionAccessibility of health resources mediates the association between hukou conversion and psychological integration. Policymakers should enhance the implementation of hukou conversion, strengthen the health resource guarantee system, and achieve a deeper psychological integration among rural older migrants.

Demand Uncertainty, Selection, and Trade

This paper examines the role of uncertainty on elasticities of trade flows with respect to variable trade costs in a canonical model of trade with monopolistic competition and heterogeneous firms. We identify two channels through which uncertainty impacts trade: through export participation thresholds (the selection effect) and the distribution of shocks governing export selection (the dispersion effect). While the selection effect dampens trade elasticities under uncertainty, the dispersion effect is ambiguous. We develop a methodology for using customs firm-level data to quantify trade elasticities under uncertainty, and the magnitude of each of the two channels through which uncertainty impacts trade. We find that uncertainty amplifies trade elasticities, on average, indicating that the dispersion effect of idiosyncratic firm-level shocks dominates -- though the effect is heterogeneous across industries. The overall magnitude of the endogenous selection mechanism on trade elasticities is small, indicating that the main drivers of trade in this class of trade models are overwhelmingly incumbent firms.

Linguistic diversity in media and state language proficiencies: evidence from Hungarian minority regions in central-Eastern Europe

ABSTRACT Can linguistic diversity in the media impede state language proficiency? In this paper, we test the extent to which the availability of minority languages in the media affects state language proficiency for ethnic minorities. We take advantage of an exogeneous development: The rapid expansion of Budapest-originating media outside Hungary in the mid-2000s transformed the media landscape in neighbouring states. Using an original survey data of ethnic Hungarians in minority regions in four Central-Eastern European states over two waves, we find (1) the availability of minority language media means minorities are consuming less media in the state language, which in turn induces low levels of state language proficiency – i.e. through an exogeneous exposure mechanism; and (2) minorities with weaker state language proficiency choose to consume minority language media – i.e. through an endogenous selection mechanism. The results suggest a strong relationship between the language of media consumption and linguistic proficiency.

Heterogeneous peer effects under endogenous selection: An application to local and migrant children in elementary schools in Shanghai

This paper develops a model that allows for heterogenous contemporaneous peer effects among different types of agents who are endogenously selected into different peer groups. We apply our approach to migrant and local students in Shanghai, where local students all go to public schools, but migrant students are endogenously selected into either public schools or lower-quality private schools. The results suggest large contemporaneous peer effects among all student groups. We conduct policy experiments to examine the effect of transferring migrant students from private schools to public schools, and show that peer effect can be substantially more important than the school effect.

Climate, conflict and internal migration in Colombia

Robust empirical evidence on the potential causal linkages between environmental change, conflict and migration is scarce. We evaluate this relationship in the context of internal migration in Colombia for the period from 2000 to 2005. Using municipalitylevel data in a gravity model that considers the issue of endogenous selection regarding both the outbreak of conflicts and the existence of non-zero migration flows, we establish an empirical causal link between droughts, conflict and migration. Our results show a positive relationship between the severity of droughts and the likelihood of conflicts, as well as between conflicts and human mobility, suggesting an indirect effect of climate on internal migration in Colombia.

Digitalization through supply chains: Evidence from the customer concentration of Chinese listed companies

This study investigates an observed contradiction between economic theory and empirical trends, specifically, whether digitalization reduces customer concentration. Previous research has primarily examined the impact of digital elements from a macro perspective. Using data from China's listed companies from 2012 to 2020, we examine the effect of digitalization on customer concentration using our micro-founded production network model, which explores the endogenous selection mechanism of customers for suppliers. Upon controlling for firm entry and exit, we conclude, theoretically and empirically, that firms with higher levels of digitalization have lower customer concentration, since they have less information asymmetry with their suppliers and higher “technology matching efficiency” to attract more customers. Evidence for the transmission of digital elements along the supply chains is also provided. Our findings underscore that firms with higher digitalization suppliers can enhance their own digitalization and attract a larger customer base, emphasizing the importance of supply chains in digitalization.

Evaluating Policies of Expanding Versus Restricting First-Line Treatment Choices: A Cost-Effectiveness Analysis Framework

ObjectivesHealthcare payers often implement coverage policies that restrict the utilization of costly new first-line treatments. Cost-effectiveness analysis can be conducted to inform these decisions by comparing the new treatment with an existing one. However, this approach may overlook important factors such as treatment effect heterogeneity and endogenous treatment selection, policy implementation costs, and diverse patient preferences across multiple treatment options. We aimed to develop a cost-effectiveness analysis framework that considers these real-world factors, facilitating the evaluation of alternative policies related to expanding or restricting first-line treatment choices. MethodsWe introduced a metric of incremental cost-effectiveness ratio (ICER) that compares an expanded choice set (CS) including the new first-line treatment with a restricted CS excluding the new treatment. ICER(CS) accounts for treatment selection influenced by heterogeneous treatment effects and policy implementation costs. We examined a basic scenario with 2 standard first-line treatment choices and a more realistic scenario involving diverse preferences toward multiple choices. To illustrate the framework, we conducted a retrospective evaluation of including versus excluding abiraterone acetate plus prednisone (AAP) (androgen deprivation therapy [ADT] + AAP) as a first-line treatment for metastatic hormone-sensitive prostate cancer. ResultsThe traditional ICERs for ADT + AAP versus ADT alone and ADT+ docetaxel were $104 269 and $206 324/quality-adjusted life-year, respectively. The ICER(CS) for comparing an expanded CS with ADT + AAP with a restricted CS without ADT + AAP was $123 179/quality-adjusted life-year. ConclusionsThe proposed framework provides decision makers with policy-relevant tools, enabling them to assess the cost-effectiveness of alternative policies of expanding versus restricting patients’ and physicians’ first-line treatment choices.

Does Supplier Instability Affect Corporate Social Responsibility? A Theoretical and Empirical Study

Prior literature typically focuses on how corporate social responsibility (CSR) is affected by the external environment and firms’ characteristics but ignores features in the supply chain. To fill this gap, we provide theoretical and empirical analyses of the role of supplier instability in CSR engagement. Specifically, our game-theoretical model considers a two-echelon supply chain where an upstream supplier is unstable and a downstream retailer makes the CSR investment. The model generates several testable hypotheses as follows: 1) the effect of supplier instability on CSR engagement is negative; 2) supplier instability mainly affects internal CSR engagement; 3) the negative instability–CSR relationship decays with the increase of supplier instability; and 4) the instability–CSR effect is more pronounced under supplier-led Stackelberg structure than retailer-led Stackelberg structure. Using a sample of Chinese firms from 2010 to 2019, we verify the above hypotheses by providing concrete empirical evidence. Our empirical estimations are robust after using the Heckman selection model to solve the endogenous selection bias.

Mixed-mode household travel surveys: synthesis from three experiments in France

Faced with the difficulty of collecting reliable and representative behavioural data for an acceptable cost, complex survey protocols associating several modes have been developed. Combining different media improve data quality, as it increases the overall response rate, but the question of data comparability remains unresolved. By comparing the results of endogenous selection models estimated using three French mixed-mode travel surveys (two in Lyon in 2006 and 2012-2015 and one in Paris in 2018), we show that it is possible to isolate the impact due to socio-economic differences from that induced by the survey mode.

Do Industrial Robots Improve Export Product Quality of Multi-Product Enterprises? Evidence in China

ABSTRACT Based on an endogenous quality selection model, we investigate the effect of industrial robots on the export product quality of China’s multi-product enterprises. The main finding is that there is a nonlinear “inverted U-shaped” relationship between industrial robot applications and export quality. Industrial robots mainly affect export quality through the “productivity improvement effect” and “innovation inhibition effect.” The influence channels exhibit heterogeneity, contingent on industries, growth stages, and import orders. We further find that the entry of new products, improvement in the quality of existing products, and reallocation of internal resources within the enterprise account for product quality change in general.

Corporate acquisitions and firm-level uncertainty: Domestic versus cross-border deals

This paper investigates how the announcement of acquisitions affect the uncertainty that financial markets perceive about acquiring firms. We use data for publicly-listed firms in the UK between 2004 and 2017 and employ a matching estimator combined with difference-in-differences to address the endogenous selection of firms into acquisitions. While acquisition announcements do not result in a significant change in the volatility of stock returns of acquiring firms across our whole sample, this result hides substantial heterogeneity. Our main finding is that the impact of acquisitions on uncertainty is crucially shaped by a deal's geographic scope—i.e. whether the takeover involves a target in the same country or abroad. Domestic deals reduce the volatility of acquirers' returns by 5% on average one quarter after the announcement, while acquiring a foreign firm increases volatility by a similar magnitude. The heightened volatility resulting from cross-border transactions is primarily driven by acquisitions in industries characterized by high investment irreversibility and foreign markets where barriers to investment are higher. Conversely, the volatility reduction following domestic acquisitions is more pronounced in industries with low irreversibility. Additionally, characteristics of the deal itself, such as the relative size of the acquisition, the payment method, and whether the deal achieves majority control of the target, also play an important role in mediating the effect of acquisitions on volatility.

For narrower income inequality: traditional finance or microfinance?

ABSTRACT This paper uses the theory of information imperfections to examine the relationship between income inequality and financial development in a dual financial system comprising traditional finance and microfinance. It uses panel data for 97 developing countries over a period characterized by declining income inequality from 2000 to 2017. Traditional finance is measured through domestic credit relative to GDP and the IMF Financial Development Index. Microfinance is measured through the size of microfinance gross loan portfolio relative to GDP and the number of active microfinance borrowers to the total population. Controlling for various measures of macroeconomic and socioeconomic variables and using different econometric specifications including a random-effects linear regression model with endogenous sample selection, the results show that microfinance consistently predicts a lower income inequality measured by the Gini coefficient, while traditional finance shows no impact. The findings of this paper draw clear policy implications regarding the role of microfinance as a tool for income equality in developing countries.

Assessing the Importance of Sample Choice and Selectivity for Sex Segregation in College Majors: A Replication of Ochsenfeld (2016)

Abstract Ochsenfeld (2016) has found that a substantial part of sex segregation in higher education results from differences in vocational interests (i.e., preferences), while constraints (e.g., relative math grades) play only a minor role. We challenge the validity of these findings because earlier work employed a cross-sectional student sample and might therefore suffer from endogenous selection (i.e., post hoc rationalizations due to simultaneous reporting of majors and preferences) and postoutcome collider bias (i.e., conditioning on the outcome). Our replication study uses panel data (National Educational Panel Study, NEPS-SC4) that allow adjustment for the two sources of bias through the application of a pretransition preference measure and inverse probability weighting. Our analyses demonstrate the validity of prior research. Furthermore, our analysis indicates that the explanatory power of the overall model and the role of constraints for sex segregation in majors vary across the propensity of sample inclusion, thereby demonstrating the importance of sample composition for testing sociological theories.

The interdependencies between the private and public sectors in open economies

Empirical evidence shows that countries with larger public sectors also have larger trade shares and a larger share of firms that export. These links between the public and the private sector are reconciled in an analytically tractable general equilibrium model allowing for a two-way causal relation between size (and the composition) of the public sector and openness and industry structure of the private sector. First, a larger public sector or a larger share of public expenditure used for public employment (alternative to transfers) results in a more open private sector (trade share and fraction of firms exporting), and it is also associated with more fat-tailedness of the firm size distribution, higher average productivity, lower average unit labour costs, and better wage competitiveness and terms of trade. These outcomes are driven by endogenous entry and selection of firms. Second, for optimal fiscal policies, international spillovers imply that non-cooperative policies have an upward bias in the overall size of the public sector, but a downward bias in transfers as a share of public expenditures. Trade liberalization and the degree of firm heterogeneity magnify these biases and thereby influence the size and structure of public expenditures.

Does CEO's foreign experience promote export performance? Evidence from China

AbstractWe examine whether CEOs with foreign experience influence firms' export performance. Using a combined dataset based on Chinese‐listed firms from 2008 to 2021, we determine that hiring CEOs with foreign experience significantly enhances firms' export performance. In addition, we document that the positive relationship between CEOs' foreign experience and firms' export performance is more pronounced when CEOs have long‐term foreign work experience. The impact of foreign experience on firms' export performance varies with CEOs' gender. Furthermore, the advantage of appointing CEOs with foreign experience is only significant when firms have long‐time lifespan or receive intensive foreign direct investment. The results are robust to the endogenous CEO selection using instrument variable method, propensity score matching method, and the fixed‐effects model. Accordingly, our findings offer policy implications by suggesting that hiring a CEO with foreign experience is an efficient way to improve firms' export performance.

Differential sensitivity to adversity by income: Evidence from a study of Bereavement

Adverse life events are often understood as having negative consequences for mental health via objective hardships, which are worse for persons with less income. But adversity can also affect mental health via more subjective mechanisms, and here, it is possible that persons with higher income will exhibit greater psychological sensitivity to negative events, for various reasons. Drawing on multiple sociological literatures, this article theorizes potential mechanisms of increasing sensitivity with income. The proposition of differential sensitivity is tested using the strategic case of spousal and parental bereavement among older US adults. The analyses find consistent evidence of increasing sensitivity of depressive symptoms with income. A series of robustness checks indicate that findings are not due to endogenous or antecedent selection. Further, exploratory analyses of mechanisms suggest that higher sensitivity among the affluent was driven by greater expectations and better relationship quality with the deceased. These findings problematize the conceptualization and assessment of human suffering in economically stratified societies.