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Format : 2018
Arthur Silve, Thierry Verdier

Septembre 2018

Il est fréquent que de voir des guerres civiles éclater simultanément dans des pays voisins. Ceci tient notamment à ce que ces pays présentent des caractéristiques communes, et aussi à ce qu’une guerre civile favorise l’apparition de conflits dans les pays voisins. La littérature empirique dissocie habituellement ces deux explications. Nous proposons un modèl de la contagion des guerres civiles, qui illustre que certaines caractéristiques des pays sont affectées par le risque de contagion. En particulier, un gouvernement peut éviter la contagion en investissant dans la qualité de ses institutions. La complémentarité stratégique entre les institutions de pays voisins génère des regroupements de pays selon leur capacité étatique. Ceci suggère que les effets de contagion ont pu jusque là être sous-estimés par la littérature empirique.

Arthur Silve : Université Laval, arthur.silve@ecn.ulaval.ca.
Thierry Verdier : École d’Économie de Paris, École des Ponts-ParisTech, PUC-Rio et CEPR, thierry.verdier@ens.fr.

Vincent Boucher, Finagnon Antoine Dedewanou, Arnaud Dufays

Septembre 2018

We study peer effects on the formation of beliefs regarding college participation. We present a structural model of learning in friendship networks. We show that the model is identified and we present a Bayesian estimation procedure. We estimate the model using data on teenagers’ beliefs regarding college participation, controlling for preferences and academic achievement. We find that, on average, friends’ beliefs account for about 12% of the updating process. We also find strong heterogeneity among schools and individuals. In particular, we find substantial unobserved individual heterogeneity, which casts doubt on the efficiency of network-targeted public policies.

Vincent Boucher: Corresponding author. Department of Economics, Université Laval, CRREP and CREATE, vincent.boucher@ecn.ulaval.ca
Finagnon A. Dedewanou: Department of Economics, Université Laval, CRREP, finagnon-antoine.dedewanou.1@ulaval.ca
Arnaud Dufays: Department of Economics, Université Namur, Associate professor, Université Laval, Arnaud.Dufays@unamur.be

Kevin Moran, Simplice Aimé Nono, Imad Rherrad

Août 2018

This paper assesses the contribution of Canadian and International (US) confidence data, drawn from consumer and business sentiment surveys, for forecasting Canadian GDP growth. The targeting approaches of Bai and Ng (2008) and Bai and Ng (2009) are employed to extract promising predictors from large databases each containing between several dozen and several hundred time series. The databases are categorised between those containing macroeconomic (Canadian and US) and confidence (Canadian and US) data, allowing us to assess the specific value added of international and confidence data. We find that forecasting ability is consistently improved by considering information from national confidence data; by contrast, their US counterparts appear to be helpful only when combined with national time-series. Overall, most relevant gains in forecasting performance are observed for short-term (up to threequarters-ahead) horizons, perhaps reflecting the timing advantage in the releases of sentiment data.

Kevin Moran : Department of Economics, Université Laval. Email: kevin.moran@ecn.ulaval.ca
Simplice Aimé Nonoy : Department of Economics, Université Laval. Email: simplice-aime.nono.1@ulaval.ca
Imad Rherrad : Ministère des Finances du Québec. Email: imad.rherrad@finances.gouv.qc.ca

Jean Armand Gnagne, Kevin Moran

Août 2018

This paper develops a monitoring and forecasting model for the aggregate monthly number of commercial bank failures in the U.S. We extract key sectoral predictors from the large set of macroeconomic variables proposed by McCracken and Ng (2016) and incorporate them in a hurdle negative binomial model to predict the number of monthly commercial bank failures. We uncover a strong and robust relationship between the predictor synthesizing housing industry variables and bank failures. This relationship suggests the existence of a link between developments in the housing sector and the vulnerability of commercial banks to non-performing loans increases and asset deterioration. We assess different specifications

Jean Armand Gnagne
Kevin Moran

Abdellah Manadir, Kevin Moran

Août 2018

This paper compares the environments in Bernanke et al. (1999) and Gertler and Karadi (2011), two popular frameworks used to incorporate financial frictions in macroeconomic modelling. We show that the key practical difference between the two frameworks lies in their implications for the link between leverage and expected future spreads of capital returns over safe rates: while the former pairs leverage to one-period-hence such spreads, the latter connects it to a distributed lag of all future spreads. We argue that this difference between the two frameworks is more crucial than the distinction often discussed in the literature, which is related to the specific location of the friction on the borrower-intermediary-entrepreneur financing chain. The paper then compares quantitative versions of the frameworks, estimated using Bayesian procedures and decoupling parameter settings related to steady states from those involving the economy’s dynamic solution around that steady state. We find that when this flexible approach in used, the friction proposed by Gertler and Karadi (2011), which emphasize long-term forward-looking behavior in the leverage equation, is preferred by aggregate data.

Abdellah Manadir: Department of Economics, Université Laval, abdellah.manadir.1@ulaval.ca
Kevin Moran: Corresponding Author. Department of Economics, Université Laval, kevin.moran@ecn.ulaval.ca

Koffi Akakpo, Marie-Amélie Boucher, Vincent Boucher

Juillet 2018

We consider a decision maker who is responsible for issuing flood warnings for the population. The population is uncertain about the credibility of the warnings and adjusts its beliefs following false alerts or missed events. We show that low credibility leads the decision maker to issue warnings for lower probabilities of flooding. In practice, those probabilities are provided by hydrological forecasts. We therefore use our model to compare welfare under alternative real-world hydrological forecasts. We find that when forecasts include non-realistic extreme scenarios, the economy may remain stuck in a state characterized by many false alerts and poor credibility.

Koffi Akakpo: Department of Economics, Université Laval, CREATE; koffi.akakpo.2@ulaval.ca
Marie-Amélie Boucher: Department of Civil and Building Engineering, Université de Sherbrooke; marie-Amelie.Boucher@usherbrooke.ca
Vincent Boucher: Department of Economics, Université Laval, CRREP and CREATE; vincent.boucher@ecn.ulaval.ca

Julie Beugnot, Guy Lacroix, Olivier Bargain

Juillet 2018

In this paper we analyse the link between homeownership and various aggregate and individual labour market outcomes. Our aim is to investigate the likely consequences of public policies that promote homeownership. To this end, we develop a circular firm-worker matching model with Nash-bargained wage setting and free market entry. Homeowners are assumed to be less mobile than tenants and to bear higher mobility costs. Our numerical exercises show that tenants usually have lower unemployment rates and lower wage rates than homeowners. Importantly, workers’ performances do not necessarily improve following an increase in the proportion of homeowners. The latter crucially depends on the relative utility enjoyed by homeowners and tenants when unemployed. In the aggregate, nevertheless, we find that the unemployment rate generally increases following an increase in the proportion of homeowners. Yet, the link between the two can be reversed if the homeowners’ utility is lower than that of tenants when unemployed. Our model thus identifies a number of conditions under which Oswald’s conjecture is likely to hold or not. Thus, our results do not necessarily support the view that policies fostering homeownership are adequate public policies given their potentially negative effect on the labour market.

Julie Beugnot : CRESE EA3190, Univ. Bourgogne Franche-Comté, F-25000 Besançon, France, julie.beugnot@univ-fcomte.fr
Olivier Charlot : THEMA, Université de Cergy-Pontoise, olivier.charlot@u-cergy.fr
Guy Lacroix : Department of economics, Université Laval, Québec, HEC-Montreal and CIRANO, Canada, Guy.Lacroix@ecn.ulaval.ca

Olivier Bargain, Guy Lacroix, Luca Tiberti

Juillet 2018

Recent advances in the collective model literature suggest ways to estimate the complete allocation of resources within households, using assignable goods and assuming adult preference similarity across demographic groups (or across spouses). While it makes welfare analysis at the individual level possible, the predictive power of the model is unknown. We propose the ?rst validation of this approach, exploiting a unique dataset from Bangladesh in which the detailed expenditure on private goods by each family member is collected. Individualized expenditure allows us to test the identifying assumptions and to derive ?observed?resource sharing within families, which can be compared to the resource allocation predicted by the model. Sharing between parents and children is well predicted on average while the model detects key aspects like the extent of pro-boy discrimination. Results overall depend on the identifying good: clothing provides the best ?t compared to other goods as it best validates the preference-similarity assumption. The model leads to accurate measures of child and adult poverty, indicating the size and direction of the mistakes made when using the traditional approach based on per adult equivalent expenditure (i.e. ignoring within-household inequality). This assessment of existing approaches to measure individual inequality and poverty is crucial for both academic and policy circles and militates in favor of a systematic use of collective models for welfare analyses.

Olivier Bargain : Bordeaux Université, Av. Leon Duguit, Pessac, France; olivier.bargain@u-bordeaux.fr
Guy Lacroix
Luca Tiberti

Claude-Denys Fluet, Thomas Lanzi

Juillet 2018

Two parties with opposed interests invest in acquiring evidence which they may only partially disclose. The decision maker then adjudicates. This set-up is compared with one permitting cross-examination of the other party?s report. Now the decision maker can better assess whether a report was deceitful through withholding of evidence. Nevertheless, decision-making need not be improved. The parties invest less in gathering evidence because they are less able to successfully manipulate information and because cross-examination is a substitute in potentially countering the other party. From the decision maker?s standpoint, there is too much cross-examination at the expense of too little direct evidence.

Bruce Shearer, Nibene Habib Somé, Bernard Fortin

Mai 2018

We measure the response of physicians to monetary incentives using matched administrative and time-use data on specialists from Québec (Canada). These physicians were paid fee-for-service contracts and supplied a number of different services. Our sample covers a period during which the Québec government changed the prices paid for clinical services. We apply these data to a multitasking model of physician labour supply, measuring two distinct responses. The first is the labour-supply response of physicians to broad-based fee increases. The second is the response to changes in the relative prices of individual services. Our results confirm that physicians respond to incentives in predictable ways. The own-price substitution effects of a relative price change are both economically and statistically significant. Income effects are present, but are overridden when prices are increased for individual services. They are more prominent in the presence of broad-based fee increases. In such cases, the income effect empirically dominates the substitution effet, which leads physicians to reduce their supply of clinical services.

Bruce Shearer : Département d’économique, Université Laval, CRREP, CIRANO and IZA. Bruce.Shearer@Ecn.Ulaval.ca
Nibene Habib Somé : Department of Epidemiology and Biostatistics, Schulich School of Medicine, University of Western Ontario. Nsome@UWO.ca
Bernard Fortin : Département d’économique, Université Laval, CRREP, CIRANO and IZA. Bernard.Fortin@Ecn.Ulaval.ca

Marion Goussé, Marion Leturcq

Avril 2018

We show how the legal settings of unmarried cohabitation affect partners' labor market outcomes. In Canada, cohabiting couples are automatically entitled to certain rights after a few years of cohabitation. In some provinces, ex-cohabiting partners can claim for alimony upon separation, in others they can claim for an equal split of all the assets acquired during the relationship. As legal settings of unmarried cohabitation differ across time, provinces and duration of the relationship, it provides a unique framework to analyze how different levels of commitment affect couples' decision regarding labor market supply. Using cross-provinces variation in the legal settings and minimum duration for eligibility, we show that unmarried cohabiting men increase their labor force supply when they become eligible to a more committed cohabitation regime, whereas women decrease theirs. Higher levels of commitment induce larger e ects on labor market outcomes.

Marion Goussé : Economics Department, Laval University - marion.gousse@ecn.ulaval.ca
Marion Leturcq : INED - marion.leturcq@ined.fr

Marie-Hélène Gagnon, Gabriel Power, Dominique Toupin

Avril 2018

This paper investigates international index return predictability using option-implied information. We document the significant predictive power of the variance risk premium (VRP), Foster-Hart risk (FH), and higher-order moments for horizons ranging from 1 to 250 days. Our results from predictive regressions show that these four risk-neutral metrics, which have the advantage of daily updating, perform well internationally. VRP and FH risk are significant predictors for several horizons, including less than one month (VRP) and longer horizons (FH). Risk-neutral skewness and kurtosis are significant for several countries across multiple horizons. Out-of-sample forecasts and utility gain calculations confirm the statistical and economic significance of these risk-neutral variables internationally.

Marie-Hélène Gagnon : FSA ULaval, CRREP, IHEIQ, CEPCI, Marie-Helene.Gagnon@fsa.ulaval.ca
Gabriel J. Power : FSA ULaval, CRREP, CRIB, Gabriel.Power@fsa.ulaval.ca
Dominique Toupin : Université Laval, dominique.toupin.1@ulaval.ca

Martin Boyer, Philippe De Donder, Claude-Denys Fluet, Marie-Louise Leroux, Pierre-Carl Michaud

Mars 2018

We examine the different hypotheses which have been put forward to explain the low demand for long-term care insurance using the results from a survey of 2000 Canadians that was conducted in the autumn of 2016. Defining the natural market of long-term care insurance buyers as the one catering to individuals aged between 50 and 70, we find that a remarkable proportion of this natural market has never been approached to purchase such protection. We estimate that approximately 60% of this natural market is currently under-served. After eliminating risk perception and demand side explanations for the low market penetration of long-term care insurance, we conclude that supply-side factors and the crowding-out by government programs are the most likely culprits in explaining the low proportion of Canadians that purchase LTC insurance from private providers.

Martin Boyer, HEC Montréal
Philippe De Donder, ESG UQAM
Claude Fluet, Université Laval
Marie-Louise Leroux, ESG UQAM
Pierre-Carl Michaud, HEC Montréal

Arthur Silve, Thierry Verdier

Mars 2018

Civil conflicts spill over into neighboring countries. This paper proposes a theory of the contagion of civil wars. Weak territorial control facilitates the emergence of a regional market for war inputs in the “porous frontier.” The contagion effect is nonlinear and creates multiple equilibrium situations of regional complexes of civil conflicts. This helps explain the observed patterns of regional clustering of conflict and institutional quality, and raises identification issues in the measurement of the contagion effect. We also derive a positive spillover of civil wars: governments are sometimes in a position to avoid contagion by improving their institutions. Finally, we explore the policy implications for military intervention, and military and institutional cooperation.

Arthur Silve: Université Laval - arthur.silve@ecn.ulaval.ca

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Thierry Verdier : PSE and École des Ponts-ParisTech, PUC-Rio, CEPR. - thierry.verdier@ens.fr

Julie Beugnot, Bernard Fortin, Guy Lacroix, Marie Claire Villeval

Mars 2018

We investigate whether peer effects at work differ by gender and whether gender differences in peer effects -if any- depend on work organization. We develop a social network model with gender heterogeneity that we test in a real-effort laboratory experiment. We compare sequential networks in which information flows from peers to the worker and simultaneous networks where it disseminates bi-directionally. We identify strong gender differences as females disregard their peers’ performance in simultaneous networks, while males are influenced by peers in both networks. Females may perceive the environment in simultaneous networks as being more competitive than in sequential networks.

Julie Beugnot : CRESE EA3190, Univ. Bourgogne Franche-Comté, F-25000 Besançon, France
Bernard Fortin : Department of economics, Université Laval, CRREP and CIRANO, Canada
Guy Lacroix : Department of economics, Université Laval, CRREP, IZA and CIRANO, Canada
Marie Claire Villeval : Université de Lyon, France; CNRS, GATE Lyon St Etienne, France; IZA, Department of Public Finance, University of Innsbruck

Anyck Dauphin , Bernard Fortin, Guy Lacroix

Mars 2018

Collective rationality is seldom if ever rejected in the literature, raising doubt about its falsifiability. We show that the standard approach to test the collective model with distribution factors may yield misleading inference. We develop a new test procedure to assess its validity. Our approach extends to households that potentially include more than two decision-makers (e.g., polygamous households, adult children). We provide a brief and informal meta-analysis that suggests that much of the evidence in favour of collective rationality in the empirical literature appears to be inconsistent with our test. We illustrate the latter using data from a survey we have conducted in Burkina Faso. Collective rationality within monogamous households is not rejected using the standard testing procedure while it is clearly rejected using our proposed test procedure. Furthermore, our test also rejects collective rationality for bigamou households. We conclude that the household efficiency does yield empirically falsifiable restrictions despite being scarcely rejected in the literature.

Anyck Dauphin : Université du Québec en Outaouais and CDESG
 

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Bernard Fortin : Department of economics, Université Laval, CRREP and CIRANO

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Guy Lacroix : Department of economics, Université Laval, CRREP and CIRANO

Marie Albertine Djuikom Tamtchouong, Guy Lacroix

Mars 2018

Immigrants often experience difficulties integrating the local labor market. In Canada, the government of Quebec implemented a program back in 1996 that explicitly selected highly qualified workers (Bachelors’, Masters’ or PhD’s). This paper investigates the extent to which the return to foreign-acquired human capital is different from the education acquired in Quebec. Specifically, we seek to estimate the benefits of post-migration education over foreign-education on the transitions between qualified and unqualified jobs and unemployment by means of a multiple-spells and multiple-states model. Our results indicate that immigrants originating from well-off countries have no need to further invest in domestic education. On the other hand, immigrants from poorer countries, despite being highly qualified, benefit greatly from such training in the long run as it eases their transitions into qualified and unqualified jobs and out of unemployment. Our results also indicate that selection into domestic education needs to be accounted for to avoid significant selection problems.

Marie Albertine Djuikom : PhD Candidate, Department of economics, Université Laval, Canada
Guy Lacroix : Department of economics, Université Laval, CRREP, IZA and CIRANO, Canada

Paola Balloon, John Cockburn, Setou Diarra, Sylvain Dessy

Février 2018

We analyze the causal effect of parental education on the potential mismatch between child monetary poverty and multidimensional deprivations. First, in a simple model of parental investment in child outcomes, we demonstrate that the misalignment between household monetary resources and parental education causes a mismatch. Indeed, a match between poverty and deprivation occurs whenever household consumption expenditure and parental education are correlated. Second, using micro-level data from Tanzania, we find that parental education has a negative effect on the probability that a monetarily non-poor child suffers some basic deprivations, and a positive effect on the likelihood that a monetarily poor child suffers no basic deprivations.

Paola Ballon: School of Geography and the Environment, University of Oxford - paola.ballon@ouce.ox.ac.uk
John Cockburn: Corresponding author - Partnership for Economic Policy - john.cockburn@pep-net.org
Sylvain Dessy: Department of Economics and CRREP, Université Laval - sdes@ecn.ulaval.ca
Setou Diarra: Department of Economics, University of Ottawa

Charles Bellemare, Marion Goussé, Guy Lacroix, Steeve Marchand

Décembre 2017

We investigate the determinants and extent of labor market discrimination toward people with acute physical disabilities (wheelchair users) using data from a large scale field experiment conducted in the province of Quebec (Canada). Applications (cover letters and CVs) were randomly sent to 1477 private firms operating in two urban regions (Montréal and Québec City) advertising open positions requiring various skill levels. The applications were randomly generated to cover a broad spectrum of potential determinants of discrimination (gender, skill level, work history, workplace adjustment costs, etc.). We find that average callback rates of disabled and non-disabled applicants is 14.4% and 31%, respectively, yielding a differential callback rate of 46%. We also investigate whether the differential may result from accessibility constraints related to the physical infrastructures where firms are located (poor and access to an elevator, availability of wheelchair, etc.). The latter are found to have no explanatory power. In addition, applications which explicitly mention that the candidate is eligible to a government subsidy to cover the cost of workplace adaptations and assistive technology do not yield higher callback rates.

Charles Bellemare : Charles.Bellemare@ecn.ulaval.ca
Marion Goussé
Guy Lacroix
Steeve Marchand

Martin Boyer, Philippe De Donder, Claude-Denys Fluet, Marie-Louise Leroux, Pierre-Carl Michaud

Septembre 2017

We conduct a stated-choice experiment where respondents are asked to rate various insurance products aimed to protect against financial risks associated with long-term care needs. Using exogenous variation in prices from the survey design, and objective risks computed from a dynamic microsimulation model, these stated-choice probabilities are used to predict market equilibrium for long-term care insurance using the framework developped by Einav et al. (2010). We investigate in turn causes for the low observed take-up of long-term care insurance in Canada despite substantial residual out-of-pocket financial risk. We first find that awareness and knowledge of the product is low in the population: 44% of respondents who do not have long-term care insurance were never offered this type of insurance while overall 31% report no knowledge of the product. Although we finnd evidence of adverse selection, results suggest it plays a minimal role in limiting take-up. On the demand side, once respondents have been made aware of the risks, we finnd that demand remains low, in part because of misperceptions of risk, lack of bequest motive and home ownership which may act as a substitute.

Martin Boyer, HEC Montréal
Philippe De Donder, ESG UQAM
Claude Fluet, Université Laval
Marie-Louise Leroux, ESG UQAM
Pierre-Carl Michaud, HEC Montréal

Vincent Boucher

Septembre 2017

I propose a simple simulation procedure for large games with multiple equilibria. The simulation procedure is based on a best-response dynamic. The implied equilibrium selection mechanism is intuitive: more stable equilibria are selected with higher probability.

Boucher: Department of Economics, Universitée Laval, CRREP and CREATE, vincent.boucher@ecn.ulaval.ca

Vincent Boucher

Septembre 2017

I present a behavioural model of network formation with positive network externalities in which individuals have preferences for being part of a clique. The behavioural model leads to an associated supermodular (Topkis, 1979) normalform game. I show that the behavioural model converges to the greatest Nash equilibrium of the associated normal-form game. I propose an approximate Bayesian computation (ABC) framework, using original summary statistics, to make inferences about individuals' preferences, and provide an illustration using data on high school friendships.

Boucher: Department of Economics, Universitée Laval, CRREP and CREATE, vincent.boucher@ecn.ulaval.ca

Charles Bellemare, Alexander Sebald, Sigrid Suetens

Août 2017

Psychological games of guilt aversion assume that preferences depend on (beliefs about) beliefs and on the guilt sensitivity of the decision-maker. We present an experiment designed to measure guilt sensitivities at the individual level for various stake sizes. We use the data to estimate a structural choice model that allows for heterogeneity, and permits that guilt sensitivities depend on stake size. We find substantial heterogeneity of guilt sensitivities in our population, with 60% of decision makers displaying stake-dependent guilt sensitivity. For these decision makers, we find that average guilt sensitivities are significantly different from zero for all stakes considered, while significantly decreasing with the level of stakes.

Bellemare: Département d’économique, Université Laval, CRREP, - cbellemare@ecn.ulaval.ca

Sebald: Department of economics, University of Copenhagen - Alexander.Sebald@econ.ku.dk

Suetens: Tilburg University, CentER, and TILEC - S.Suetens@uvt.nl

Claude-Denys Fluet, Murat C. Mungan

Août 2017

Fault-based liability regimes require an inquiry into the nature of the defendant’s conduct, whereas this type of inquiry is absent in strict liability regimes. Therefore, verdicts reached through fault-based liability regimes can convey superior information compared to verdicts reached through strict liability regimes. Further reflection reveals that this advantage is enjoyed by fault-based liability regimes only if the evidence related to the nature of defendants’ actions is such ciently informative. Otherwise, admitting such evidence can add noise to the information conveyed through verdicts. Therefore, liability regimes have a function of tuning signals conveyed on to third parties, which, in turn, causes deterrence effects by a¤ecting the informal sanctions imposed on defendants who are found liable. We construct a model wherein this function is formalized, and we identify the optimal liability regime and burden of proof as a function of various factors (e.g. the commonality of the harmful act, and the informativeness of the evidence).

Fluet: Université Laval, CRREP, CRED - claude.fluet@fsa.ulaval.ca

Mungan: George Mason University, Antonin Scalia Law School - mmungan@gmu.edu

Badi H. Baltagia, Georges Bresson, Anoop Chaturvedi, Guy Lacroix

Août 2017

The paper develops a general Bayesian framework for robust linear static panel data models using ε-contamination. A two-step approach is employed to derive the conditional type-II maximum likelihood (ML-II) posterior distribution of the coeffcients and individual effects. The ML-II posterior densities are weighted averages of the Bayes estimator under a base prior and the data-dependent empirical Bayes estimator. Two-stage and three stage hierarchy estimators are developed and their finite sample performance is investigated through a series of Monte Carlo experiments. These include standard random effects as well as Mundlak-type, Chamberlain-type and Hausman-Taylor-type models. The simulation results underscore the relatively good performance of the three-stage hierarchy estimator. Within a single theoretical framework, our Bayesian approach encompasses a variety of specifications while conventional methods require separate estimators for each case.

Baltagi : Department of Economics and Center for Policy Research, Syracuse University, Syracuse, New York, U.S.A. and Department of Economics, Leicester University, Leicester, UK - bbaltagi@maxwell.syr.edu

Bresson: Université Paris II / Sorbonne Universités, France - bresson-georges@orange.fr

Chaturvedi: University of Allahabad, India - anoopchaturv@gmail.com

Lacroix: Départment d'économique, Université Laval, Québec, Canada - Guy.Lacroix@ecn.ulaval.ca

Claude-Denys Fluet

Juin 2017

We conduct an experiment where participants choose between actions that provide private benefits but may also impose losses on strangers. Three legal environments are compared: no law, strict liability for the harm caused to others, and an efficiently designed negligence rule where damages are paid only when the harmful action causes a net social loss. Legal obligations are either perfectly enforced (Severe Law) or only weakly so (Mild Law), i.e., material incentives are then nondeterrent. We investigate how legal obligations and social norms interact. Our results show that liability rules strengthen pro-social behavior and suggest that strict liability has a greater effect than the negligence rule.

Deffains : Université Paris 2, CRED, University  of Liverpool, bruno.deffains@u-paris2.fr
Espinosa : Université Paris 2, CRED, romain.espinosa@u-paris2.fr
Fluet : Université Laval, CRREP, CRED, claude.fluet@fsa.ulaval.ca

Mbéa Bell, Sylvain Dessy

Mars 2017

This paper compares a clean energy standard (CES) and a carbon tax (CT), using theory and quantitative experiments. A two-stage duopolistic competition in the electricity sector between a polluting plant and its non-polluting rival anchors the model underlying these experiments. The CT induces both plants to contribute to clean electricity, whereas the CES only incentivizes the non-polluting plant. Ultimately, what matters for the ranking of these instruments is the size of the pre-existing competitive gap between the two rival plants. When this gap is sufficiently small, the CES becomes the more cost-effective instrument, irrespective of the pre-specified emissions reduction target.

Mbéa Bel : Département d'Économique Université Laval and CREPP. Email: mbea.bell.1@ulaval.ca
Sylvain Dessy : Département d'Économique Université Laval and CREPP. Email: sylvain.dessy@ecn.ulaval.ca

Steeve Marchand, Maria Adelaida Lopera

Mars 2017

We study how social interactions influence entrepreneurs' attitudes toward risk. We conduct two risk-taking experiments within workshops organized for young Ugandan entrepreneurs. Between the two experiments, the entrepreneurs participate in a networking activity where they build relationships and discuss with each other. We collect detailed data on peer network formation and on participants' choices before and after the networking activity. Our design implicitly controls for homophily effects (i.e. the tendency of individuals to develop relationships with people who have similar characteristics). We find that risk aversion is affected by social conformity. Participants tend to become more (less) risk averse in the second experiment if the peers they discuss with are on average more (less) risk averse in the first experiment. This suggests that social interactions play a role in shaping risk preferences.

Lopera : University of Munich (e-mail: malopera@econ.lmu.de)
Marchand : Université Laval (e-mail: steeve.marchand@ecn.ulaval.ca)

Rokhaya Dieye, Bernard Fortin

Janvier 2017

This paper explores gender peer effects heterogeneity in adolescent Body Mass Index (BMI). We propose a utility-based non-cooperative social network model with effort technology. We allow the gender composition to influence peer effects. We analyze the possibility of recovering the fundamentals of our structural model from the best-response functions. We provide identification conditions of these functions generalizing those of the homogeneous version of the model. Extending Liu and Lee [2010], we consider 2SLS and GMM strategies to estimate our model using Add Health data. We provide tests of homophily in the formation of network and reject them after controlling for network (school) fixed effects. The joint (endogenous plus contextual) gender homogeneous model is rejected. However, we do not reject that the endogenous effects are the same.This suggests that the source of gender peer effects heterogeneity is the contextual effects. We find that peers’ age, parents’ education, health status, and race are relevant for the latter effects and are gender-dependent.

Dieye: Department of Economics-Laval University, and Grenoble Applied Economics Laboratory-INRA, Université Grenoble Alpes, France: rokhaya.dieye.1@ulaval.ca
Fortin: Department of Economics-Laval University, CIRPÉE, IZA, and CIRANO: bernard.fortin@ecn.ulaval.ca

Jean-Marie Dufour, Richard Luger

Janvier 2017

This paper develops tests of the null hypothesis of linearity in the context of autoregressive models with Markov-switching means and variances. These tests are robust to the identification failures that plague conventional likelihood-based inference methods. The approach exploits the moments of normal mixtures implied by the regime-switching process and uses Monte Carlo test techniques to deal with the presence of an autoregressive component in the model specification. The proposed tests have very respectable power in comparison to the optimal tests for Markov-switching parameters of Carrasco et al. (2014) and they are also quite attractive owing to their computational simplicity. The new tests are illustrated with an empirical application to an autoregressive model of U.S. output growth.

Dufour: William Dow Professor of Economics, McGill University, Centre interuniversitaire de recherche en analyse des organisations (CIRANO), and Centre interuniversitaire de recherche en économie quantitative (CIREQ) : jean-marie.dufour@mcgill.ca
Luger: Département de finance, assurance et immobilier, Université Laval : richard.luger@fsa.ulaval.ca

Sylvain Dessy, Setou Diarra, Roland Pongou

Décembre 2016

Public policy addressing the harmful practice of adolescent marriage tends to leave out men, as prospective grooms. Using micro-level data from Nigeria in combination with plausible instrumental variables, we find that a male's education significantly decreases the likelihood that he marries an adolescent girl. We show that this negative relationship is not a mere mechanical effect reflecting the endogeneity between schooling and marriage-timing decisions, and that it is stronger where patriarchal gender norms are weaker. We develop a model that explains this causal effect as resulting from the complementarity between father's and mother's education in the production of child quality.

Sylvain Dessy : Department of Economics and CRREP, Université Laval. Email: sdes@ecn.ulaval.ca
Setou Diarra : Department of Economics and CRREP, Université Laval. Email: setou-mamadou.diarra.1@ulaval.ca
Roland Pongou : Department of Economics, University of Ottawa. Email: roland.pongou@uottawa.ca

 

Vincent Boucher, Marion Goussé

Décembre 2016

We present a flexible model of wage dynamics where information about job openings is transmitted through social networks. The model is based on Calvò-Armengol & Jackson (2004, 2007) and extends their results outside the stationary distribution, and under observed and unobserved heterogeneity. We present an empirical application using the British Household Panel Survey by exploiting direct information about individual's social networks. We find that having more employed friends leads to more job offers but to lower wages due to higher mismatch. We also find that non-relative friends are more helpful than relatives, and that women benefit relatively more from their male friends.

Boucher: Department of Economics, Université Laval, CRREP and CREATE vincent.boucher@ecn.ulaval.ca.
Goussée: Department of Economics, Université Laval and CRREP, marion.gousse@ecn.ulaval.ca

Arnaud Dufays, Maciej Augustyniak, Luc Bauwens

Décembre 2016

A new model - the factorial hidden Markov volatility (FHMV) model - is proposed for financial returns and their latent variances. It is also applicable to model directly realized variances. Volatility is modeled as a product of three components: a Markov chain driving volatility persistence, an independent discrete process capable of generating jumps in the volatility, and a predictable (data-driven) process capturing the leverage effect. An economic interpretation is attached to each one of these components. Moreover, the Markov chain and jump components allow volatility to switch abruptly between thousands of states, and the transition matrix of the model is structured in such a way as to generate a high degree of volatility persistence. In-sample results on six financial time series highlight that the FHMV process compares favorably to state-of-the-art volatility models. A forecasting experiment shows that it also outperforms its competitors when predicting volatility over time horizons ranging from one to one hundred days.

Maciej Augustyniak : Département de mathématiques et de statistique, Université de Montréal ; Quantact
Actuarial and Financial Mathematics Laboratory ; augusty@dms.umontreal.ca
Luc Bauwens : Université catholique de Louvain, CORE, B-1348 Louvain-La-Neuve, Belgium ; Université
Côte d'Azur - SKEMA, France ; luc.bauwens@uclouvain.be
Arnaud Dufays : Département d'économique, UniversitéLaval, 1025 avenue des Sciences-Humaines,
Quebec City, Quebec ; arnaud.dufays@ecn.ulaval.ca

Arnaud Dufays

Décembre 2016

Change-point time series specifications constitute flexible models that capture unknown structural changes by allowing for switches in the model parameters. Nevertheless most models suffer from an over-parametrization issue since typically only one latent state variable drives the switches in all parameters. This implies that all parameters have to change when a break happens. To gauge whether and where there are structural breaks in realized variance, we introduce the sparse change-point HAR model. The approach controls for model parsimony by limiting the number of parameters which evolve from one regime to another. Sparsity is achieved thanks to employing a nonstandard shrinkage prior distribution. We derive a Gibbs sampler for inferring the parameters of this process. Simulation studies illustrate the excellent performance of the sampler. Relying on this new framework, we study the stability of the HAR model using realized variance series of several major international indices between January 2000 and August 2015.

Arnaud Dufays: Université Laval https://sites.google.com/site/websiteofarnauddufays/
Jeroen V.K. Rombouts : ESSEC Business School, Av. B. Hirsch, Cergy Pontoise, rombouts@essec.edu

Kevin Moran, Simplice Aime Nono

Octobre 2016

This paper assesses the contribution of confidence - or sentiment - data in predicting Canadian economic slowdowns. A probit framework is specified and applied to an indicator on the status of the Canadian business cycle produced by the OECD. Explanatory variables include all available Canadian data on sentiment (which arise from four different surveys) as well as various macroeconomic and financial data. The model is estimated via maximum likelihood and sentiment data are introduced either as individual variables, as simple averages (such as confidence indices) and as confidence factors extracted, via principal components' decompositions, from a larger dataset in which all available sentiment data have been collected. Our findings indicate that the full potential of sentiment data for forecasting future business cycles in Canada is attained when all data are used through the use of factor models.

Kevin Moran : Department of Economics, Universit.é Laval, kevin.moran@ecn.ulaval.ca
Simplice Aimé Nono : Department of Economics, Laval University, simplice-aime.nono.1@ulaval.ca
Imad Rherrad : Ministère des Finances du Québec. Email: imad.rherrad@finances.gouv.qc.ca

Bernard Fortin, Safa Ragued

Octobre 2016

Almost 40% of Canadian youth who left postsecondary education in 1999 had returned two years later. This paper investigates the extent to which schooling discontinuities affect post-graduation starting wages and whether the latter are influenced by the reasons behind these discontinuities. We use data from the 2007 National Graduate Survey. We apply Lewbel’s (2012) generated instruments approach. The source of identification is a heteroscedastic covariance restriction of the error terms that is a feature of many models of endogeneity. We also perform two-stage quantile regressions. We find a positive effect on wages of temporary interruption for men who held a full-time job during their out-of-school spell(s). Both men and women witness a wage decrease if their interruption depends on health issues. Women bear a wage penalty if their interruption is due to a part-time job, to lack of money, or is caused by reasons other than health, work, and money.

Bernard Fortin : Department of Economics, Laval University, IZA, CIRANO bernard.fortin@ecn.ulaval.ca
Safa Ragued : Department of Economics, Laval University, Quebec, Canada. Email: safa.ragued.1@ulaval.ca

Marion Goussé

Septembre 2016

We extend the search-matching model of the marriage market of Shimer and Smith (2000) to allow for labor supply, home production, match-specific shocks and endogenous divorce. We study nonparametric identification using panel data on marital status, education, family values, wages, and market and non market hours, and we develop a semiparametric estimator. We estimate how much sorting results from time use specialization or homophilic preferences. We estimate how equilibrium marriage formation affects the wage elasticities of market and non market hours. We estimate individuals’ willingness to pay for marriage and quantify the redistributive effect of intrahousehold resource sharing.

Goussé : Université Laval, Départment of Economics marion.gousse@ecn.ulaval.ca
Jacquement: Paris School of Economics and Université Paris nicolas.Jacquemet@univ-paris1.fr
Robin : Sciences Po, Paris and University College of London,  jeanmarc.robin@sciences-po.fr

Stephen Gordon

Août 2016

This study explores the ‘brain drain’ explanation for the concentration of incomes in Canada during the past thirty years, namely, that high-skilled Canadians have made use of the high salaries on offer in the United States to extract higher salaries at home. If this is the case, then for a given level of US salaries, the threat to accept outside offers should be more credible when the Canadian dollar is depreciating against the US dollar, and weaker when the Canadian dollar is appreciating. The data are broadly consistent with this claim: income concentration worsened during the depreciations of the 1980s and 1990s, and eased when the Canadian dollar began to appreciate in value. The paper develops a simple two-parameter model based on the propositions that high earners in Canada can use US salaries to bargain for higher salaries, and that Canadian high earners can shelter part of their income from personal income taxes. It also offers some preliminary evidence about the parameter values consistent with available data. The results suggest that higher top marginal personal income tax rates may actually accentuate top-end after-tax income inequality. If high earners are able to use their bargaining power to extract pay increases to offset higher tax rates, the the burden of increased taxes will be pushed down to those lower down in the income distribution, leaving the after-tax income distribution more unequal than it was before.

Stephen Gordon: Département d’économique, Université Laval, stephen.gordon@ecn.ulaval.ca

Simon Brière, Bernard Fortin, Guy Lacroix

Juin 2016

Pour des CV semblables en tout point, Samira Benounis recevra-t-elle moins dʼinvitations à un entretien dʼembauche que Valérie Tremblay dans la région de la Capitale-Nationale (Québec, Canada) ? Cet article tente de répondre à cette question à partir dʼune expérience utilisant la méthode de testing par envoi de CV. Nos résultats montrent que, toutes choses égales par ailleurs, la probabilité dʼêtre invitée à un entretien dʼembauche diminue de 11 % lorsque la candidate a un nom dʼorigine maghrébine plutôt que québécoise. Ce constat suggère la présence dʼune discrimination à lʼembauche des candidates dʼorigine maghrébine dans la région de la Capitale-Nationale.

Simon Brière : Département dʼéconomique, Université Laval et CIRPÉE, simon.briere.2@ulaval.ca
Bernard Fortin : Département dʼéconomique, Université Laval, CIRPÉE et CIRANO, bernard.fortin@ecn.ulaval.ca
Guy Lacroix : Département dʼéconomique, Université Laval, CIRPÉE et CIRANO, Guy.Lacroix@ecn.ulaval.ca

Gilles Boevi Koumou, Kevin Moran

Septembre 2015

This paper proposes a new formulation of the Maximum Diversification indexation strategy based on Rao’s Quadratic Entropy (RQE). It clarifies the investment problem underlying the Most Diversified Portfolio (MDP) formed with this strategy, identifies the source of the MDP’s out-of-sample performance, and suggests dimensions along which this performance can be improved. We show that these potential improvements are quantitatively important and are robust to portfolio turnover, portfolio risk, estimation window, and covariance matrix estimation.

Carmichael: Département d’économique, Université Laval benoit.carmichael@ecn.ulaval.ca
Koumou: CIRPÉE et Département d’économique, Université Laval nettey-boevi-gilles-b.koumou.1@ulaval.ca
Moran: CIRPÉE et Département d’économique, Université Laval kevin.moran@ecn.ulaval.ca

Arnaud Dufays

Septembre 2015

Sequential Monte Carlo (SMC) methods are widely used for non-linear filtering purposes. Nevertheless the SMC scope encompasses wider applications such as estimating static model parameters so much that it is becoming a serious alternative to Markov-Chain Monte-Carlo (MCMC) methods. Not only SMC algorithms draw posterior distributions of static or dynamic parameters but additionally provide an estimate of the marginal likelihood. The tempered and time (TNT) algorithm, developed in the paper, combines (off-line) tempered SMC inference with on-line SMC inference for drawing realizations from many sequential posterior distributions without experiencing a particle degeneracy problem. Furthermore, it introduces a new MCMC rejuvenation step that is generic, automated and well-suited for multi-modal distributions. As this update relies on the wide heuristic optimization literature, numerous extensions are already available. The algorithm is notably appropriate for estimating Change-point models. As an example, we compare Change-point GARCH models through their marginal likelihoods over time.

Dufays : Département d’économique and CIRPÉE, arnaud.dufays@ecn.ulaval.ca

Paul Blais-Morisset, Vincent Boucher, Bernard Fortin

Septembre 2015

Chaque année, une part significative des dépenses gouvernementales est consacrée au sport de niveau professionnel ou amateur. Certains analystes affirment que ces investissements contribuent fortement au succès d’un pays aux Jeux olympiques (JO). Nous présentons une analyse économétrique du nombre de médailles obtenues aux JO. Nous introduisons l’investissement public en sport comme facteur potentiellement important du nombre de médailles remportées par un pays, en prenant soin de contrôler pour l’hétérogénéité inobservable des pays participants aux JO. Nous présentons, à notre connaissance, la première modélisation du succès olympique utilisant des spécifications de comptage (count data model) en panel estimées à l’aide de variables instrumentales et captant les caractéristiques individuelles et invariantes des nations. Selon les spécifications du modèle retenues, un pays aux caractéristiques moyennes aurait dû accroître son investissement de 72 à 94 millions de dollars, ceteris paribus, afin d’obtenir une médaille supplémentaire aux JO d’été de Londres en 2012..

Blais-Morisset : Université Laval, Département d’économique paul.blais.morisset.1@ulaval.ca
Boucher : CIRPÉE et CREATE, Département d’économique, Université Laval vincent.boucher@ecn.ulaval.ca
Fortin : CIRPÉE et CIRANO, Département d’économique, Université Laval bernard.fortin@ecn.ulaval.ca

Jean Armand Gnagne, Kevin Moran

Juin 2015

This paper assesses the impact that a widely-based Securities Transaction Tax (STT) could have on the likelihood of systemic financial crises. We apply the methodology developed by Demirgüç-Kunt and Detragiache (1998) [IMF Staff Papers 45 (1)] to a panel dataset of 34 OECD countries for the sample 1973 – 2012, using a measure of a country’s average bid-ask spread in financial markets as a proxy for the likely effect of a STT on transactions costs. Our results indicate that the establishment of a STT could sizeably increase the risk of financial crises.

Carmichael: Département d’économique, Université Laval and CIRPÉE benoit.carmichael@ecn.ulaval.ca
Gnagne: Département d’économique, Université Laval and CIRPÉE jean-armand.gnagne.1@ulaval.ca
Moran: Département d’économique, Université Laval and CIRPÉE kevin.moran@ecn.ulaval.ca

Vincent Boucher

Mai 2015

This paper estimates the causal impact of party affiliation (Republican or Democrat) of U.S. governors on pollution. Using a regression discontinuity design, gubernatorial election data, and air quality data from U.S. Environmental Protection Agency (EPA), we find that pollution is lower under Democratic governors. We identify that this is mostly due to environmental policies enacted by Democratic governors.

Beland: Department of Economics, Louisiana State University lbeland@lsu.ed
Boucher: Department of Economics, Université Laval and CIRPÉE vincent.boucher@ecn.ulaval.ca

André-Marie Taptué

Mai 2015

In the context of polarized societies, income homogeneity is linked to the frequency andthe intensity of social unrest. Most homogenous countries exhibit a lower frequency of intense social conflicts and less homogeneous countries show a higher frequency of moderate social conflicts. This paper develops a methodology to compare the degree of homogeneity of two income distributions. We use for that purpose and index of polarization that does not account for alienation. This index is the identification component of polarization that measures the degree to which individuals feel alike in an income distribution. This development leads to identification dominance curves and derives first-order and higher-order stochastic dominance conditions. First-order stochastic dominance is performed through identification dominance curves drawn on a support of identification thresholds. These curves are used to determine whether identification, homogeneity, or similarity of individuals is greater in one distribution than in another for general classes of polarization indices and ranges of possible identification thresholds. We also derive the asymptotic sampling distribution of identification dominance curves and test dominance between two distributions using Intersection Union tests and bootstrapped p-values. Our methodology is illustrated by comparing pairs of distributions of eleven countries drawn from the Luxembourg Income Study database.

Taptué: Département d’économique and CIRPÉE, Université Laval, Canada andre-marie.taptue.1@ulaval.ca

André-Marie Taptué

Mai 2015

This paper shows how to compare the size of the middle class in income distributions using a polarization index that do not account for identification. We derive a class of polarization indices where the antagonism function is constant in identification. The comparison of distributions using an index from this class motivates the introduction of an alienation dominance surface, which is a function of an alienation threshold. We first prove that a distribution has a large alienation component in polarization compared to another if the former always has a larger dominance surface than the latter regardless of the value of the alienation threshold. Then, we show that the distribution with large dominance surface is more concentrated in the tails and has a smaller middle class than the other distribution. We implement statistical inference and test dominance betweenpairs of distributions using the asymptotic theory and Intersection Union tests. Our methodology is illustrated in comparing the declining of the middle class across pairwise distributions of twenty-two countries from the Luxembourg Income Study data base.

Taptué: Département d’économique and CIRPÉE, Université Laval, Canada andre-marie.taptue.1@ulaval.ca

Gilles Boevi Koumou, Kevin Moran

Mai 2015

This paper extends the use of Rao(1982b)’s Quadratic Entropy (RQE) to modern portfolio theory. It argues that the RQE of a portfolio is a valid, flexible and unifying approach to measuring portfolio diversification. The paper demonstrates that portfolio’s RQE can encompass most existing measures, such as the portfolio variance, the diversification ratio, the normalized portfolio variance, the diversification return or excess growth rates, the Gini-Simpson indices, the return gaps, Markowitz’s utility function and Bouchaud’s general free utility. The paper also shows that assets selected under RQE can protect portfolios from mass destruction (systemic risk) and an empirical illustration suggests that this protection is substantial.

Carmichael: CIRPÉE et Département d’économique, Université Laval benoit.carmichael@ecn.ulaval.ca
Koumou: Corresponding author. CIRPÉE et Département d’économique nettey-boevi-gilles-b.koumou.1@ulaval.ca
Moran: CIRPÉE et Département d’économique, Université Laval Canada kevin.moran@ecn.ulaval.ca

Vincent Boucher, Bernard Fortin

Février 2015

We study some recent developments and challenges in the empirics of the effects of social networks. We focus in particular on researchers’ ability to make policy recommendations based on a standard linear econometric model. We examine the potential compatibility between this type of econometric model and a microeconomic theoretical approach based on fundamentals, such as preferences, technology and decision processes. We discuss sources of identification for the social multiplier as well as for the identity of the key player. We study the possibility of testing endogeneity in network formation. We analyse the use of proxy variables and their impact for the causal interpretation of the peer effect coefficients. Our analysis suggests that greater care should be taken in grounding econometric network models to sound and credible theoretical underpinnings.

Boucher: Department of Economics, Université Laval, CIRPÉE vincent.boucher@ecn.ulaval.ca
Fortin: Department of Economics, Université Laval, CIRPÉE and CIRANO bernard.fortin@ecn.ulaval.ca

Décembre 2014

We assess whether global social welfare has improved in the last decades despite (or because of) the substantial increase in global population. We use for this purpose a relatively unknown but simple and attractive social evaluation approach called criticallevel generalized utilitarianism (CLGU). CLGU posits that social welfare increases with population size if and only if the new lives come with a level of living standards higher than that of a critical level. Despite its attractiveness, CLGU poses a number of practical difficulties that may explain why the literature has left it largely unexplored. We address these difficulties by developing new procedures for making partial CLGU orderings. The headline result is that we can robustly conclude that world welfare has increased between 1990 and 2005 if we judge that lives with per capita yearly consumption of more than $1,248 necessarily increase social welfare; the same conclusion applies to Sub-Saharan Africa if and only if we are willing to make that same judgement for lives with any level of per capita yearly consumption above $147. Otherwise, some of the admissible CLGU functions will judge the last two decades’ increase in global population size to have lowered global social welfare.

Cockburn: Département d’économique, PEP and CIRPÉE, Université Laval, Canada jcoc@ecn.ulaval.ca
Duclos: Département d’économique, PEP, CIRPÉE, Université Laval, Canada and FERDI jyves@ecn.ulaval.ca
Zabsonré: zabagnes@yahoo.fr

Charles Bellemare, Luc Bissonnette, Sabine Kröger

Novembre 2014

This paper discusses the choice of the number of participants for within-subjects (WS) designs and between-subjects (BS) designs based on simulations of statistical power allowing for different numbers of experimental periods. We illustrate the usefulness of the approach in the context of field experiments on gift exchange. Our results suggest that a BS design requires between 4 to 8 times more subjects than a WS design to reach an acceptable level of statistical power. Moreover, the predicted minimal sample sizes required to correctly detect a treatment effect with a probability of 80% greatly exceed sizes currently used in the literature. Our results suggest that adding experimental periods in an experiment can substantially increase the statistical power of a WS design, but have very little effect on the statistical power of the BS design. Finally, we discuss issues relating to numerical computation and present the powerBBK package programmed for STATA. This package allows users to conduct their own analysis of power for the different designs (WS and BS), conditional on user specified experimental parameters (true effect size, sample size, number of periods, noise levels for control and treatment, error distributions), statistical tests (parametric and nonparametric), and estimation methods (linear regression, binary choice models (probit and logit), censored regression models (tobit)).

All authors: Université Laval, Department of Economics
Bellemare: charles.bellemare@ecn.ulaval.ca
Bissonnette: luc.bissonnette@ecn.ulaval.ca
Kröger: sabine.kroger@ecn.ulaval.ca

Vincent Boucher

Novembre 2014

I present a model of conformism in social networks that incorporates both peer effects and self-selection. I find that equilibrium behaviors are linked through the Laplacian matrix of the equilibrium network. I show that conformism has positive social value and that social welfare can be bounded by network centrality and connectivity measures. I apply the model using empirical data on high school student participation in extracurricular activities. I find that the local effects of conformism (i.e. endogenous peer effect for a fixed network structure) range from 7.5% to 45%, depending on the number of peers that an individual has. Simulations show that the optimal policies of an inequality-averse policy-maker change in relation to the size of a school. Small schools should encourage shy students to integrate more with other students, while large schools should focus on promoting role models within the school.

Boucher : Department of Economics, Université Laval; and CIRPÉE vincent.boucher@ecn.ulaval.ca

Charles Bellemare, Bruce Shearer

Mai 2014

We present results from a field experiment designed to measure the importance of managerial commitment to a contract within a firm that pays its workers piece rates. In the tree planting industry the piece rate paid to workers is determined as a function of the difficulty of the terrain to be planted. During the experiment, workers began planting a terrain at a trial piece rate, but were told this rate would be revised upwards if, after a few work days, average productivity was below that observed on a similar (control) terrain on which the firm had committed to the contract. Our results suggest that worker productivity was 20% to 40% lower in the absence of commitment. The reduction was less pronounced when workers had less time to benefit from any subsequent increase in the piece rate. This provides support for models of worker turnover as a means of overcoming ratchet effects.

Bellemare : Département d’économique, Université Laval, CIRPÉE, IZA cbellemare@ecn.ulaval.ca

 

,

Shearer : Département d’économique, Université Laval, CIRPÉE, IZA, CIRANO bruce.shearer@ecn.ulaval.ca