In this paper we study consumption network effects. Does the consumption of our peers affect our own consumption? How large is such effect? What are the economic mechanisms behind it? We use long panel data on the entire Danish population to construct a measure of consumption based on administrative tax records on income and assets. We combine tax record data with matched employer-employee data so that we can construct peer groups based on workplace, which gives us a much tighter, precise, and credible definition of networks than used in previous literature. We use the available data to construct peer groups that do not perfectly overlap, and as such provide valid instruments derived from the network structure of one's peers group. The longitudinal nature of our data also allow us to estimate fixed effects models, which help us tackle reflection, self-selection, and common-shocks issues all at once. We estimate non-negligible and statistically significant endogenous and exogenous peer effects. Estimated effects are quite relevant for policies as they generate non-negligible multiplier effect. We also investigate what mechanisms generate such effects, distinguishing between "keeping up with the Joneses", a status model, and a more traditional risk sharing view.
Consumption Network Effects -- by Giacomo De Giorgi, Anders Frederiksen, Luigi Pistaferri
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The Staying Power of Staggered Wage and Price Setting Models in Macroeconomics -- by John B. Taylor
After many years, many critiques, and many variations, the staggered wage and price setting model is still the most common method of incorporating nominal rigidities into empirical macroeconomic models used for policy analysis. The aim of this chapter is to examine and reassess the staggered wage and price setting model. The chapter updates and expands on my chapter in the 1999 Handbook of Macroeconomics which reviewed key papers that had already spawned a vast literature. It is meant to be both a survey and user-friendly exposition organized around a simple "canonical" model. It provides a guide to the recent explosion of microeconomic empirical research on wage and price setting, examines central controversies, and reassesses from a longer perspective the advantages and disadvantages of the model as it has been applied in practice. An important question for future research is whether staggered price and wage setting will continue to be the model of choice or whether it needs to be replaced by a new paradigm.
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Equity is Cheap for Large Financial Institutions: The International Evidence -- by Priyank Gandhi, Hanno Lustig, Alberto Plazzi
Equity is a cheap source of funding for a country's largest financial institutions. In a large panel of 31 countries, we find that the stocks of a country's largest financial companies earn returns that are significantly lower than stocks of non-financials with the same risk exposures. In developed countries, only the largest banks' stock earns negative risk-adjusted returns, but, in emerging market countries, other large non-bank financial firms do. Even though large banks have high betas, these risk-adjusted return spreads cannot be attributed to the risk anomaly. Instead, we find that the large-minus-small, financial-minus-nonfinancial, risk-adjusted spread varies across countries and over time in ways that are consistent with stock investors pricing in the implicit government guarantees that protect shareholders of the largest banks. The spread is significantly larger for the largest banks in countries with deposit insurance, backed by fiscally strong governments, and in common law countries that offer shareholders better protection from expropriation. Finally, the spread predicts large crashes in that country's stock market and output.
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Housing and Macroeconomics -- by Monika Piazzesi, Martin Schneider
This paper surveys the literature on housing in macroeconomics. We first collect facts on house prices and quantities in both the time series and the cross section of households and housing markets. We then present a theoretical model of frictional housing markets with heterogeneous agents that nests or provides background for many studies. Finally, we describe quantitative results obtained during the last 15 years on household behavior, business cycle dynamics and asset pricing, as well as boom bust episodes.
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Insurance and the High Prices of Pharmaceuticals -- by David Besanko, David Dranove, Craig Garthwaite
We present a model in which prospective patients are liquidity constrained, and thus health insurance allows patients access to treatments and services that they otherwise would have been unable to afford. Consistent with large expansions of insurance in the U.S. (e.g., the Affordable Care Act), we assume that policies expand the set of services that must be covered by insurance. We show that the profit-maximizing price for an innovative treatment is greater in the presence of health insurance than it would be for an uninsured population. We also show that consumer surplus is less than it would be if the innovation was not covered. These results show that even in the absence of moral hazard, there are channels through which insurance can negatively affect consumer welfare. Our model also provides an economic rationale for the claim that pharmaceutical firms set prices that exceed the value their products create. We empirically examine our model's predictions by studying the pricing of oncology drugs following the 2003 passage of Medicare Part D. Prior to 2003, drugs covered under Medicare Part B had higher prices than those that would eventually be covered under Part D. In general, the trends in pricing across these categories were similar. However, after 2003 there was a far greater increase in prices for products covered under Part D, and as result, products covered by both programs were sold at similar prices. In addition, these prices were quite high compared to the value created by the products---suggesting that the forced bundle of Part D might have allowed firms to capture more value than their products created.
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The Over Time Impacts Of Smoke Free Air Ordinances In Texas -- by Silda Nikaj, Joshua J. Miller, John Tauras
We examine an untested hypothesis that posits that null results in early studies examining the economic impacts of smoking bans were driven by sample selection. Early adopters could better absorb the shock of bans, but among worse selected late adopters bans would adversely impact bars and restaurants. We exploit variation in the timing of ban institution among Texas municipalities and track their impact over time. We find similar adjustments trajectories between late and early adopters, but late adopters appear unaffected by bans in the long-term. Consistent with earlier studies, bans do not significantly affect bar and restaurant sales or establishment level alcohol tax expenditures.
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The Unintended Consequences of the Zero Lower Bound Policy -- by Marco Di Maggio, Marcin Kacperczyk
We study the impact of the zero lower bound interest rate policy on the industrial organization of the U.S. money fund industry. We find that in response to policies that maintain low interest rates, money funds: change their product offerings by investing in riskier asset classes; are more likely to exit the market; and reduce the fees they charge their investors. The consequence of fund closures resulting from interest rate policy is the relocation of resources in affected fund families and in the asset management industry in general, as well as decline in capital of issuers borrowing from money funds.
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Does Emigration Delay Political Change? Evidence from Italy during the Great Recession -- by Massimo Anelli, Giovanni Peri
Mobility within the European Union (EU) brings great opportunities and large overall benefits. Economically stagnant areas, however, may be deprived of talent through emigration, which may harm dynamism and delay political, and economic, change. A significant episode of emigration took place between 2010 and 2014 from Italy following the deep economic recession beginning in 2008 that hit most acutely countries in the southern EU. This period coincided with significant political change in Italy. Combining administrative data on Italian citizens who reside abroad and data on characteristics of city councils, city mayors and local vote, we analyze whether emigration reduced political change. The sudden emigration wave interacted with the pre-existing networks of emigration from Italian municipalities allow us to construct a proxy for emigration that is municipality-specific and independent of local political and economic trends. Using this proxy as an instrument, we find that municipalities with larger emigration rates had smaller shares of young, college educated and women among local politicians. They were also more likely to have had municipal councils dismissed due to inefficiency or corruption, a larger share of vote for status-quo-supporting parties and lower political participation. Migration was also associated with lower firm creation.
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Bias in Official Fiscal Forecasts: Can Private Forecasts Help? -- by Jeffrey A. Frankel, Jesse Schreger
Government forecasts of GDP growth and budget balances are generally more over-optimistic than private sector forecasts. When official forecasts are especially optimistic relative to private forecasts ex ante, they are more likely also to be over-optimistic relative to realizations ex post. For example, euro area governments during the period 1999-2007 assiduously and inaccurately avoided forecasting deficit levels that would exceed the 3% Stability and Growth Pact threshold; meanwhile private sector forecasters were not subject to this crude bias. As a result, using private sector forecasts as an input into the government budgeting-making process would probably reduce official forecast errors for budget deficits.
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The Impact of Late-Career Job Loss and Genotype on Body Mass Index -- by Lauren L. Schmitz, Dalton Conley
This study examines whether the effect of job loss on body mass index (BMI) at older ages is moderated by genotype using twenty years of socio-demographic and genome-wide data from the Health and Retirement Study (HRS). To avoid any potential confounding we interact layoffs due to a plant or business closure--a plausibly exogenous environmental exposure--with a polygenic risk score for BMI in a regression-adjusted semiparametric differences-in-differences matching framework that compares the BMI of those before and after an involuntary job loss with a control group that has not been laid off. Results indicate genetically-at-risk workers who lost their job before they were eligible for Social Security benefits, or before age 62, were more likely to gain weight. Further analysis reveals heterogeneous treatment effects by demographic, health, and socioeconomic characteristics. In particular, we find high risk individuals who gained weight after a job loss were more likely to be male, in worse health, single, and at the bottom half of the wealth distribution. Across the board, effects are concentrated among high-risk individuals who were not overweight prior to job loss, indicating unemployment at older ages may trigger weight gain in otherwise healthy or normal weight populations.
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The Long Run Impacts of Merit Aid: Evidence from California's Cal Grant -- by Eric Bettinger, Oded Gurantz, Laura Kawano, Bruce Sacerdote
We examine the impacts of being awarded a Cal Grant, among the most generous state merit aid programs. We exploit variation in eligibility rules using GPA and family income cutoffs that are ex ante unknown to applicants. Cal Grant eligibility increases degree completion by 2 to 5 percentage points in our reduced form estimates. Cal Grant also induces modest shifts in institution choice at the income discontinuity. At ages 28-32, Cal Grant receipt increases by three percentage points the likelihood of living in California at the income discontinuity, and raises earnings by four percentage points at the GPA discontinuity.
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Adoption of New Information and Communications Technologies in the Workplace Today -- by Timothy Bresnahan, Pai-Ling Yin
The invention of new applications based on information and communications technologies (ICTs) has had two economic effects up to now. These applications have transformed production, creating value for applications-inventing companies and their customers and increasing economic growth through quality improvements. The same applications have shifted the relative demand for different kinds of labor, raising the demand for already highly-compensated managers and professionals relative to other workers. This paper considers the likely impact of new ICT technologies coming into application in the workplace today in light of the economic and technical forces behind ICT application up to now.
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High Frequency Evidence on the Demand for Gasoline -- by Laurence Levin, Matthew S. Lewis, Frank A. Wolak
Daily city-level expenditures and prices are used to estimate the price responsiveness of gasoline demand in the U.S. Using a frequency of purchase model that explicitly acknowledges the distinction between gasoline demand and gasoline expenditures, we consistently find the price elasticity of demand to be an order of magnitude larger than estimates from recent studies using more aggregated data. We demonstrate directly that higher levels of spatial and temporal aggregation generate increasingly inelastic demand estimates, and then perform a decomposition to examine the relative importance of several different sources of bias likely to arise in more aggregated studies.
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A New Approach to an Age-Old Problem: Solving Externalities by Incenting Workers Directly -- by Greer K. Gosnell, John A. List, Robert Metcalfe
Understanding motivations in the workplace remains of utmost import as economies around the world rely on increases in labor productivity to foster sustainable economic growth. This study makes use of a unique opportunity to "look under the hood" of an organization that critically relies on worker effort and performance. By partnering with Virgin Atlantic Airways on a field experiment that includes over 40,000 unique flights covering an eight-month period, we explore how information and incentives affect captains' performance. Making use of more than 110,000 captain-level observations, we find that our set of treatments--which include performance information, personal targets, and prosocial incentives--induces captains to improve efficiency in all three key flight areas: pre-flight, in-flight, and post-flight. We estimate that our treatments saved between 266,000-704,000 kg of fuel for the airline over the eight-month experimental period. These savings led to between 838,000-2.22 million kg of CO2 abated at a marginal abatement cost of negative $250 per ton of CO2 (i.e. a $250 savings per ton abated) over the eight-month experimental period. Methodologically, our approach highlights the potential usefulness of moving beyond an experimental design that focuses on short-run substitution effects, and it also suggests a new way to combat firm-level externalities: target workers rather than the firm as a whole.
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June 20, 2016 - Investment Professionals Expect to Increase Their Firmâs Technology Budget to Comply with the DOL Rule, Finds SS&C Technologies Survey
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BME: TEKNIA Registers A â¬40 Million Bonds Programme With MARF
The Mercado Alternativo de Renta Fija (MARF) has registered a Medium & Long-Term Programme by Teknia Manufacturing Group with a maximum amount of €40 million, which will allow the company to issue bonds over the next 12 months with fixed and variable interest rates and maturities that will range from 4 to 7 years.
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SGX Launches Sustainability Reporting Guide And Rule; Will Provide Training And Tools To Companies
Singapore Exchange (SGX) today introduced sustainability reporting on a “comply or explain” basis.
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CME Group Announces The Launch Of European Union Wheat Futures And Options
CME Group, the world's leading and most diverse derivatives marketplace, today announced the launch of physically delivered European Union (EU) Wheat futures and options on futures contracts to begin trading on 12 September 2016, pending all relevant regulatory review periods. These contracts will be listed subject to the rules and regulations of the Chicago Board of Trade (CBOT).
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SR Labs Rebrands As Vela Trading Technologies - Driving The Delivery Of Next Generation Trading And Market Data Technology As Well As Renewing Energy And Focus On Core Competencies
S R Labs, LLC, a global leader in trading and market data technology, today announced it will operate under the new name of Vela Trading Technologies, LLC (Vela), bringing the best of its technology, products and talent under one roof.
Vela’s mission will continue to focus on creating and providing leading edge financial technology, with a strong emphasis on satisfying client requirements and global delivery. With Vela, technology and business decision makers will be able to bring efficiency and simplicity to their trading infrastructure, while also improving cost savings.
Jennifer Nayar, CEO of Vela, said: “We see Vela as a new and exciting opportunity to build on our strong heritage, pedigree and loyal client base and bring the best of both SR Labs and Wombat into one place.” She added, ”with Vela, we want to simplify everything around us: through our technology, we want to simplify how firms interact with the markets, and increase efficiency; and with the creation of a new, integrated business entity, we want to make it easier for clients and prospects to buy from us, to work with us and to partner with us.”
ith fully integrated and augmented product sets, Vela’s clients can benefit from:
Global Connectivity: Trading has become increasingly global and multi-asset and Vela’s dedicated global team of experts sits uniquely at the intersection of technology and the financial markets, helping clients stay two steps ahead. Clients who depend on our technology include banks, hedge funds, proprietary trading firms and a range of other market participants globally.
Technology Deliverability: Vela offers a full suite of custom, scalable financial technology products and services focused on enterprise use of market data feeds and market access. Vela’s industrial strength technology along with value-added services include tools and support services that save time, money and complexity.
Talent Expertise: A global, world-class client services team supports Vela’s comprehensive product suite to ensure implementation surpasses expectations. Many of Vela’s offerings are also available as fully managed services. Providing the technology to underpin trading infrastructure, Vela enables clients to focus on core business and competencies.
Jennifer continued, “Since I joined one year ago we have been working on consolidating our product set, redefining our messages and delivering a new vision to the market. We have also been combining the best of our two historic companies’ cultures and our key values will continue to be at the foundation of everything we do now and in the future: Teamwork; Technology Excellence; Efficiency; Focus; Integrity; Reliability. This is an exciting time for our team and we look forward to seeing where this new journey takes us.”
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Bats Global Markets Joins FTSE Mondo Visione Exchanges Index
Bats Global Markets, Inc. (Bats: BATS), a leading global operator of exchanges and services for financial markets, was added to the FTSE Mondo Visione Exchanges Index effective for the open of Monday June 20.
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