Vous êtes ici

Accueil » Publications
Format : 2017
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

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,

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, -

Sebald: Department of economics, University of Copenhagen -

Suetens: Tilburg University, CentER, and TILEC -

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 -

Mungan: George Mason University, Antonin Scalia Law School -

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 -

Bresson: Université Paris II / Sorbonne Universités, France -

Chaturvedi: University of Allahabad, India -

Lacroix: Départment d'économique, Université Laval, Québec, Canada -

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,
Espinosa : Université Paris 2, CRED,
Fluet : Université Laval, CRREP, CRED,

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:
Sylvain Dessy : Département d'Économique Université Laval and CREPP. Email:

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:
Marchand : Université Laval (e-mail:

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:
Fortin: Department of Economics-Laval University, CIRPÉE, IZA, and CIRANO:

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) :
Luger: Département de finance, assurance et immobilier, Université Laval :

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:
Setou Diarra : Department of Economics and CRREP, Université Laval. Email:
Roland Pongou : Department of Economics, University of Ottawa. Email:


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
Goussée: Department of Economics, Université Laval and CRREP,

Arnaud Dufays, Maciej Augustyniak, Luc Bauwens

Décembre 2016

A new model -the high-dimensional Markov (HDM) 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. The Markov chain and jump components allow volatility to switch abruptly between thousands of states. The transition probability matrix of the Markov chain is structured in such a way that the multiplicity of the second largest eigenvalue can be greater than one. This distinctive feature generates a high degree of volatility persistence. The statistical properties of the HDM model are derived and an economic interpretation is attached to each component. In-sample results on six financial time series highlight that the HDM model compares favorably to the main existing volatility processes. A forecasting experiment shows that the HDM model significantly outperforms its competitors when predicting volatility over time horizons longer than five days.

Maciej Augustyniak : Département de mathématiques et de statistique, Université de Montréal ; Quantact
Actuarial and Financial Mathematics Laboratory ;
Luc Bauwens : Université catholique de Louvain, CORE, B-1348 Louvain-La-Neuve, Belgium ; Université
Côte d'Azur - SKEMA, France ;
Arnaud Dufays : Département d'économique, UniversitéLaval, 1025 avenue des Sciences-Humaines,
Quebec City, Quebec ;

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
Jeroen V.K. Rombouts : ESSEC Business School, Av. B. Hirsch, Cergy Pontoise,

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,
Simplice Aimé Nono : Department of Economics, Laval University,
Imad Rherrad : Ministère des Finances du Québec. Email:

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
Safa Ragued : Department of Economics, Laval University, Quebec, Canada. Email:

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
Jacquement: Paris School of Economics and Université Paris
Robin : Sciences Po, Paris and University College of London,

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,

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,
Bernard Fortin : Département dʼéconomique, Université Laval, CIRPÉE et CIRANO,
Guy Lacroix : Département dʼéconomique, Université Laval, CIRPÉE et CIRANO,

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
Koumou: CIRPÉE et Département d’économique, Université Laval
Moran: CIRPÉE et Département d’économique, Université Laval

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,

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
Boucher : CIRPÉE et CREATE, Département d’économique, Université Laval
Fortin : CIRPÉE et CIRANO, Département d’économique, Université Laval

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
Gnagne: Département d’économique, Université Laval and CIRPÉE
Moran: Département d’économique, Université Laval and CIRPÉE

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

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

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

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
Koumou: Corresponding author. CIRPÉE et Département d’économique
Moran: CIRPÉE et Département d’économique, Université Laval Canada

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
Fortin: Department of Economics, Université Laval, CIRPÉE and CIRANO

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
Duclos: Département d’économique, PEP, CIRPÉE, Université Laval, Canada and FERDI

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

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

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
Shearer : Département d’économique, Université Laval, CIRPÉE, IZA, CIRANO