General Economics
- [1] arXiv:2405.13169 [pdf, ps, html, other]
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Title: Evaluating Offshore Electricity Market Design Considering Endogenous Infrastructure Investments: Zonal or Nodal?Subjects: General Economics (econ.GN)
Policy makers are formulating offshore energy infrastructure plans, including wind turbines, electrolyzers, and HVDC transmission lines. An effective market design is crucial to guide cost-efficient investments and dispatch decisions. This paper jointly studies the impact of offshore market design choices on the investment in offshore electrolyzers and HVDC transmission capacity. We present a bilevel model that incorporates investments in offshore energy infrastructure, day-ahead market dispatch, and potential redispatch actions near real-time to ensure transmission constraints are respected. Our findings demonstrate that full nodal pricing, i.e., nodal pricing both onshore and offshore, outperforms the onshore zonal combined with offshore nodal pricing or offshore zonal layouts. While combining onshore zonal with offshore nodal pricing can be considered as a second-best option, it generally diminishes the profitability of offshore wind farms. However, if investment costs of offshore electrolyzers are relatively low, they can serve as catalysts to increase the revenues of the offshore wind farms. This study contributes to the understanding of market designs for highly interconnected offshore power systems, offering insights into the impact of congestion pricing methodologies on investment decisions. Besides, it is useful towards understanding the interaction of offshore loads like electrolyzers with financial support mechanisms for offshore wind farms.
- [2] arXiv:2405.13186 [pdf, ps, html, other]
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Title: Doing the right thing (or not) in a lemons-like situation: on the role of social preferences and Kantian moral concernsSubjects: General Economics (econ.GN)
We conduct a laboratory experiment using framing to assess the willingness to ``sell a lemon'', i.e., to undertake an action that benefits self but hurts the other (the ``buyer''). We seek to disentangle the role of other-regarding preferences and (Kantian) moral concerns, and to test if it matters whether the decision is described in neutral terms or as a market situation. When evaluating an action, morally motivated individuals consider what their own payoff would be if -- hypothetically -- the roles were reversed and the other subject chose the same action (universalization). We vary the salience of role uncertainty, thus varying the ease for participants to envisage the role-reversal scenario.
- [3] arXiv:2405.13241 [pdf, ps, html, other]
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Title: Selecting Experimental Sites for External ValidityMichael Gechter, Keisuke Hirano, Jean Lee, Mahreen Mahmud, Orville Mondal, Jonathan Morduch, Saravana Ravindran, Abu S. ShonchoySubjects: General Economics (econ.GN)
Policy decisions often depend on evidence generated elsewhere. We take a Bayesian decision-theoretic approach to choosing where to experiment to optimize external validity. We frame external validity through a policy lens, developing a prior specification for the joint distribution of site-level treatment effects using a microeconometric structural model and allowing for other sources of heterogeneity. With data from South Asia, we show that, relative to basing policies on experiments in optimal sites, large efficiency losses result from instead using evidence from randomly-selected sites or, conversely, from sites with the largest expected treatment effects.
- [4] arXiv:2405.13251 [pdf, ps, html, other]
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Title: Valores extremos de inflaci\'on en Costa RicaComments: in Spanish language. arXiv admin note: text overlap with arXiv:2405.12240Subjects: General Economics (econ.GN); Applications (stat.AP)
Maintaining low, non-negative and stable inflation levels is a necessary condition for the stability of the economy as a whole, because the monetary authorities of most industrialized countries, including the Central Bank of Costa Rica since 2005, they have oriented their monetary policy precisely to that task. Still Thus, both in Costa Rica and internationally, most of the statistical modeling of inflation has been limited to modeling their expectancy conditional on different covariates using linear models. This implies a lack of knowledge of the dynamics of the extreme values of the inflation rate and how these are related with other macroeconomic variables. In Costa Rica this is of particular importance since in several periods Negative quarter-on-quarter inflation rates have recently been experienced, which can be problematic if this becomes a recurring phenomenon. Therefore, in this work we propose to answer what is the relationship between the gap of GDP, inflation expectations, imported inflation rate, and the extreme values of the inflation rate in Costa Rica. That is, the main objective is to determine the relationship between the extreme values of the the inflation rate, GDP gap, inflation expectations and imported inflation.
- [5] arXiv:2405.13296 [pdf, ps, html, other]
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Title: The Debt-Inflation Channel of the German (Hyper-)InflationSubjects: General Economics (econ.GN)
This paper studies how a large increase in the price level is transmitted to the real economy through firm balance sheets. Using newly digitized macro- and micro-level data from the German inflation of 1919-1923, we show that inflation led to a large reduction in real debt burdens and bankruptcies. Firms with higher nominal liabilities at the onset of inflation experienced a larger decline in interest expenses, a relative increase in their equity values, and higher employment during the inflation. The results are consistent with real effects of a debt-inflation channel that operates even when prices and wages are flexible.
- [6] arXiv:2405.13327 [pdf, ps, other]
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Title: Monitoring the carbon emissions transition of global building end-use activityComments: 7 pages, 6 figuresSubjects: General Economics (econ.GN)
The building sector is the largest emitter globally and as such is at the forefront of the net-zero emissions pathway. This study is the first to present a bottom-up assessment framework integrated with the decomposing structural decomposition method to evaluate the emission patterns and decarbonization process of global residential building operations and commercial building operation simultaneously over the last two decades. The results reveal that (1) the average carbon intensity of global commercial building operations has maintained an annual decline of 1.94% since 2000, and emission factors and industrial structures were generally the key to decarbonizing commercial building operations; (2) the operational carbon intensity of global residential buildings has maintained an annual decline of 1.2% over the past two decades, and energy intensity and average household size have been key to this decarbonization; and (3) the total decarbonization of commercial building operations and residential buildings worldwide was 230.28 and 338.1 mega-tons of carbon dioxide per yr, respectively, with a decarbonization efficiency of 10.05% and 9.4%. Overall, this study assesses the global historical progress in decarbonizing global building operations and closes the relevant gap, and it helps plan the stepwise carbon neutral pathway of future global buildings by the mid-century.
- [7] arXiv:2405.13341 [pdf, ps, other]
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Title: Wealth inequality and utility: Effect evaluation of redistribution and consumption morals using macro-econophysical coupled approachComments: 27 pages, 6 figuresSubjects: General Economics (econ.GN); Multiagent Systems (cs.MA); Physics and Society (physics.soc-ph)
Reducing wealth inequality and increasing utility are critical issues. This study reveals the effects of redistribution and consumption morals on wealth inequality and utility. To this end, we present a novel approach that couples the dynamic model of capital, consumption, and utility in macroeconomics with the interaction model of joint business and redistribution in econophysics. With this approach, we calculate the capital (wealth), the utility based on consumption, and the Gini index of these inequality using redistribution and consumption thresholds as moral parameters. The results show that: under-redistribution and waste exacerbate inequality; conversely, over-redistribution and stinginess reduce utility; and a balanced moderate moral leads to achieve both reduced inequality and increased utility. These findings provide renewed economic and numerical support for the moral importance known from philosophy, anthropology, and religion. The revival of redistribution and consumption morals should promote the transformation to a human mutual-aid economy, as indicated by philosopher and anthropologist, instead of the capitalist economy that has produced the current inequality. The practical challenge is to implement bottom-up social business, on a foothold of worker coops and platform cooperatives as a community against the state and the market, with moral consensus and its operation.
- [8] arXiv:2405.13422 [pdf, ps, html, other]
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Title: Learning Trade Opportunities through Production NetworkComments: 34 pages, 8 tablesSubjects: General Economics (econ.GN)
Using data on the Spanish firm-level production network we show that firms learn about international trade opportunities and related business know-how from their production network peers. Our identification strategy leverages the panel structure of the data, import origin variation, and network structure. We find evidence of both upstream and downstream network effects, even after accounting for sectoral and geographical spillovers. Larger firms are better at absorbing valuable information but worse at disseminating it. Connections with geographically distant firms provide more useful information to start importing.
- [9] arXiv:2405.14611 [pdf, ps, html, other]
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Title: Is the EJRA proportionate and therefore justified? A critical review of the EJRA policy at CambridgeOliver Linton, Raghavendra Rau, Patrick Baert, Peter Bossaerts, Jon Crowcroft, Gill Evans, Paul Ewart, Robert Foley, Nick Gay, Paul Kattuman, Fermin Moscoso del Prado Martin, Stefan Scholtes, Hamid Sabourian, Richard J. SmithSubjects: General Economics (econ.GN)
This paper critically evaluates the HESA (Higher Education Statistics Agency) Data Report for the Employer Justified Retirement Age (EJRA) Review Group at the University of Cambridge (Cambridge 2024), identifying significant methodological flaws and misinterpretations. Our analysis reveals issues such as application of data filters only to the Cambridge sample, inconsistent variable treatment, and erroneous statistical conclusions. The Report suggests EJRA increased job creation rates at Cambridge, but we show Cambridge consistently had lower job creation rates for Established Academic Careers compared to other Russell Group universities, both before and after EJRA implementation in 2011. This suggests that EJRA is not a significant factor driving job creation rates. Since other universities without an EJRA exhibit higher job creation rates, this suggests job creation can be sustained without such a policy. We conclude that the EJRA did not achieve its intended goal of increasing opportunities for young academics and may have exacerbated existing disparities compared to other leading universities. We recommend EJRA be abolished at Cambridge since it does not meet its justified aims and could be viewed as unlawful age discrimination.
- [10] arXiv:2405.14617 [pdf, ps, html, other]
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Title: Towards an Optimal Staking Design: Balancing Security, User Growth, and Token AppreciationJournal-ref: Proceedings of the ChainScience 2024 ConferenceSubjects: General Economics (econ.GN)
This paper examines the economic and security implications of Proof-of-Stake (POS) designs, providing a survey of POS design choices and their underlying economic principles in prominent POS-blockchains. The paper argues that POS-blockchains are essentially platforms that connect three groups of agents: users, validators, and investors. To meet the needs of these groups, blockchains must balance trade-offs between security, user adoption, and investment into the protocol. We focus on the security aspect and identify two different strategies: increasing the quality of validators (static security) vs. increasing the quantity of stakes (dynamic security). We argue that quality comes at the cost of quantity, identifying a trade-off between the two strategies when designing POS systems. We test our qualitative findings using panel analysis on collected data. The analysis indicates that enhancing the quality of the validator set through security measures like slashing and minimum staking amounts may decrease dynamic security. Further, the analysis reveals a strategic divergence among blockchains, highlighting the absence of a single, universally optimal staking design solution. The optimal design hinges upon a platform's specific objectives and its developmental stage. This research compels blockchain developers to meticulously assess the trade-offs outlined in this paper when developing their staking designs.
New submissions for Friday, 24 May 2024 (showing 10 of 10 entries )
- [11] arXiv:2405.13753 (cross-list from cs.LG) [pdf, ps, html, other]
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Title: A Dynamic Model of Performative Human-ML Collaboration: Theory and Empirical EvidenceComments: 9 Pages and appendixSubjects: Machine Learning (cs.LG); Artificial Intelligence (cs.AI); Human-Computer Interaction (cs.HC); General Economics (econ.GN)
Machine learning (ML) models are increasingly used in various applications, from recommendation systems in e-commerce to diagnosis prediction in healthcare. In this paper, we present a novel dynamic framework for thinking about the deployment of ML models in a performative, human-ML collaborative system. In our framework, the introduction of ML recommendations changes the data generating process of human decisions, which are only a proxy to the ground truth and which are then used to train future versions of the model. We show that this dynamic process in principle can converge to different stable points, i.e. where the ML model and the Human+ML system have the same performance. Some of these stable points are suboptimal with respect to the actual ground truth. We conduct an empirical user study with 1,408 participants to showcase this process. In the study, humans solve instances of the knapsack problem with the help of machine learning predictions. This is an ideal setting because we can see how ML models learn to imitate human decisions and how this learning process converges to a stable point. We find that for many levels of ML performance, humans can improve the ML predictions to dynamically reach an equilibrium performance that is around 92% of the maximum knapsack value. We also find that the equilibrium performance could be even higher if humans rationally followed the ML recommendations. Finally, we test whether monetary incentives can increase the quality of human decisions, but we fail to find any positive effect. Our results have practical implications for the deployment of ML models in contexts where human decisions may deviate from the indisputable ground truth.
Cross submissions for Friday, 24 May 2024 (showing 1 of 1 entries )
- [12] arXiv:2108.01026 (replaced) [pdf, ps, html, other]
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Title: US Spillovers of US Monetary Policy: Information effects & Financial FlowsSubjects: General Economics (econ.GN)
This paper quantifies the international spillovers of US interest rates by explicitly controlling for the "Fed Information Effect". I use multiple identification strategies that identify two components of monetary policy surprises around FOMC meetings: a pure US monetary policy shock component and a "Fed Information Effect" component. On the one hand, a US tightening caused by a pure US monetary policy component leads to an economic recession, an exchange rate depreciation and tighter financial conditions. On the other hand, a tightening of US monetary policy caused by the "Fed Information Effect" leads to an economic expansion, an exchange rate appreciation and looser financial conditions. Ignoring the "Fed Information Effect" biases the impact of US interest rates and may explain recent atypical findings which suggest an expansionary impact of US monetary policy shocks on the rest of the world.
- [13] arXiv:2208.14972 (replaced) [pdf, ps, html, other]
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Title: Making the Elite: Top Jobs, Disparities, and SolutionsComments: Improved exposition for additional claritySubjects: General Economics (econ.GN)
How do socioeconomically unequal screening practices impact access to elite firms and what policies might reduce inequality? Using personnel data from elite U.S. and European multinational corporations recruiting from an elite Indian college, I show that caste disparities in hiring do not arise in many job search stages, including: applications, application reading, written aptitude tests, large group debates that assess socio-emotional skills, and job choices. Rather, disparities arise in the final round, comprising non-technical personal interviews that screen on family background, neighborhood, and "cultural fit." These characteristics are plausibly weakly correlated with productivity (at the interview round) but strongly correlated with caste. Employer willingness to pay for an advantaged caste is as large as that for a full standard deviation increase in college GPA. A hiring subsidy that eliminates the caste penalty would be more cost-effective in diversifying elite hiring than equalizing the caste distribution of pre-college test scores or enforcing hiring quotas.
- [14] arXiv:2402.04429 (replaced) [pdf, ps, html, other]
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Title: Meritocracy and Its Discontents: Long-run Effects of Repeated School Admission ReformsComments: Keywords: Elite Education, Market Design, Strategic Behavior, Regional Mobility, Universal Access, Persistent EffectsSubjects: General Economics (econ.GN)
What happens if selective colleges change their admission policies? We study this question by analyzing the world's first implementation of nationally centralized meritocratic admissions in the early twentieth century. We find a persistent meritocracy-equity tradeoff. Compared to the decentralized system, the centralized system admitted more high-achievers and produced more occupational elites (such as top income earners) decades later in the labor market. This gain came at a distributional cost, however. Meritocratic centralization also increased the number of urban-born elites relative to rural-born ones, undermining equal access to higher education and career advancement.
- [15] arXiv:2311.14676 (replaced) [pdf, ps, html, other]
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Title: Decoding Social Sentiment in DAO: A Comparative Analysis of Blockchain Governance CommunitiesSubjects: Computers and Society (cs.CY); Cryptography and Security (cs.CR); Human-Computer Interaction (cs.HC); General Economics (econ.GN); Applications (stat.AP)
Blockchain technology is leading a revolutionary transformation across diverse industries, with effective governance being critical for the success and sustainability of blockchain projects. Community forums, pivotal in engaging decentralized autonomous organizations (DAOs), significantly impact blockchain governance decisions. Concurrently, Natural Language Processing (NLP), particularly sentiment analysis, provides powerful insights from textual data. While prior research has explored the potential of NLP tools in social media sentiment analysis, there is a gap in understanding the sentiment landscape of blockchain governance communities. The evolving discourse and sentiment dynamics on the forums of top DAOs remain largely unknown. This paper delves deep into the evolving discourse and sentiment dynamics on the public forums of leading DeFi projects: Aave, Uniswap, Curve DAO, Yearn.finance, Merit Circle, and Balancer, focusing primarily on discussions related to governance issues. Our study shows that participants in decentralized communities generally express positive sentiments during Discord discussions. Furthermore, there is a potential interaction between discussion intensity and sentiment dynamics; higher discussion volume may contribute to a more stable sentiment from code analysis. The insights gained from this study are valuable for decision-makers in blockchain governance, underscoring the pivotal role of sentiment analysis in interpreting community emotions and its evolving impact on the landscape of blockchain governance. This research significantly contributes to the interdisciplinary exploration of the intersection of blockchain and society, specifically emphasizing the decentralized blockchain governance ecosystem. We provide our data and code for replicability as open access on GitHub.