pwc-archive/papers-with-abstracts huggingface dataset:
The role of Common Agricultural Policy (CAP) in enhancing and stabilising farm income: an analysis of income transfer efficiency and the Income Stabilisation Tool
Authors: Biagini Luigi, Simone Severini
Date: 2021-04-29 00:00:00

Since its inception, the E.U.'s Common Agricultural Policy (CAP) aimed at ensuring an adequate and stable farm income. While recognizing that the CAP pursues a larger set of objectives, this thesis focuses on the impact of the CAP on the level and the stability of farm income in Italian farms. It uses microdata from a high standardized dataset, the Farm Accountancy Data Network (FADN), that is available in all E.U. countries. This allows if perceived as useful, to replicate the analyses to other countries. The thesis first assesses the Income Transfer Efficiency (i.e., how much of the support translate to farm income) of several CAP measures. Secondly, it analyses the role of a specific and relatively new CAP measure (i.e., the Income Stabilisation Tool - IST) that is specifically aimed at stabilising farm income. The assessment of the potential use of Machine Learning procedures to develop an adequate ratemaking in IST. These are used to predict indemnity levels because this is an essential point for a similar insurance scheme. The assessment of ratemaking is challenging: indemnity distribution is zero-inflated, not-continuous, right-skewed, and several factors can potentially explain it. We address these problems by using Tweedie distributions and three Machine Learning procedures. The objective is to assess whether this improves the ratemaking by using the prospective application of the Income Stabilization Tool in Italy as a case study. We look at the econometric performance of the models and the impact of using their predictions in practice. Some of these procedures efficiently predict indemnities, using a limited number of regressors, and ensuring the scheme's financial stability.
Where to Refuel: Modeling On-the-way Choice of Convenience Outlet
Authors: Ari Pramono, Harmen Oppewal
Date: 2021-04-28 00:00:00

This paper introduces on-the-way choice of retail outlet as a form of convenience shopping. It presents a model of on-the-way choice of retail outlet and applies the model in the context of fuel retailing to explore its implications for segmentation and spatial competition. The model is a latent class random utility choice model. An application to gas station choices observed in a medium-sized Asian city show the model to fit substantially better than existing models. The empirical results indicate consumers may adopt one of two decision strategies. When adopting an immediacy-oriented strategy they behave in accordance with the traditional gravity-based retail models and tend to choose the most spatially convenient outlet. When following a destination-oriented strategy they focus more on maintaining their overall trip efficiency and so will tend to visit outlets located closer to their main destination and are more susceptible to retail agglomeration effects. The paper demonstrates how the model can be used to inform segmentation and local competition analyses that account for variations in these strategies as well as variations in consumer type, origin and time of travel. Simulations of a duopoly setting further demonstrate the implications.
Modeling Managerial Search Behavior based on Simon's Concept of Satisficing
Authors: Friederike Wall
Date: 2021-04-28 00:00:00
Tasks: Decision Making

Computational models of managerial search often build on backward-looking search based on hill-climbing algorithms. Regardless of its prevalence, there is some evidence that this family of algorithms does not universally represent managers' search behavior. Against this background, the paper proposes an alternative algorithm that captures key elements of Simon's concept of satisficing which received considerable support in behavioral experiments. The paper contrasts the satisficing-based algorithm to two variants of hill-climbing search in an agent-based model of a simple decision-making organization. The model builds on the framework of NK fitness landscapes which allows controlling for the complexity of the decision problem to be solved. The results suggest that the model's behavior may remarkably differ depending on whether satisficing or hill-climbing serves as an algorithmic representation for decision-makers' search. Moreover, with the satisficing algorithm, results indicate oscillating aspiration levels, even to the negative, and intense - and potentially destabilizing - search activities when intra-organizational complexity increases. Findings may shed some new light on prior computational models of decision-making in organizations and point to avenues for future research.
The Future of Employment Revisited: How Model Selection Determines Automation Forecasts
Authors: Fabian Stephany, Hanno Lorenz
Date: 2021-04-28 00:00:00
Tasks: Diversity, Model Selection

The uniqueness of human labour is at question in times of smart technologies. The 250 years-old discussion on technological unemployment reawakens. Prominently, Frey and Osborne (2017) estimated that half of US employment will be automated by algorithms within the next 20 years. Other follow-up studies conclude that only a small fraction of workers will be replaced by digital technologies. The main contribution of our work is to show that the diversity of previous findings regarding the degree of job automation is, to a large extent, driven by model selection and not by controlling for personal characteristics or tasks. For our case study, we consult experts in machine learning and industry professionals on the susceptibility to digital technologies in the Austrian labour market. Our results indicate that, while clerical computer-based routine jobs are likely to change in the next decade, professional activities, such as the processing of complex information, are less prone to digital change.
Social Norms Offer Explanation for Inconsistent Effects of Incentives on Prosocial Behavior
Authors: Caroline Graf, Eva-Maria Merz, Bianca Suanet, Pamala Wiepking
Date: 2021-04-28 00:00:00

Incentives have surprisingly inconsistent effects when it comes to encouraging people to behave prosocially. Classical economic theory, according to which a specific behavior becomes more prevalent when it is rewarded, struggles to explain why incentives sometimes backfire. More recent theories therefore posit a reputational cost offsetting the benefits of receiving an incentive -- yet unexplained effects of incentives remain, for instance across incentive types and countries. We propose that social norms can offer an explanation for these inconsistencies. Ultimately, social norms determine the reputational costs or benefits resulting from a given behavior, and thus variation in the effect of incentives may reflect variation in norms. We implemented a formal model of prosocial behavior integrating social norms, which we empirically tested on the real-world prosocial behavior of blood donation. Blood donation is essential for many life-saving medical procedures, but also presents an ideal testing ground for our theory: Various incentive policies for blood donors exist across countries, enabling a comparative approach. Our preregistered analyses reveal that social norms can indeed account for the varying effects of financial and time incentives on individual-level blood donation behavior across 28 European countries. Incentives are associated with higher levels of prosociality when norms regarding the incentive are more positive. The results indicate that social norms play an important role in explaining the relationship between incentives and prosocial behavior. More generally, our approach highlights the potential of integrating theory from across the economic and behavioral sciences to generate novel insights, with tangible consequences for policy-making.
Regional poverty in Bulgaria in the period 2008-2019
Authors: Iva Raycheva
Date: 2021-04-28 00:00:00

Background: Poverty among the population of a country is one of the most disputable topics in social studies. Many researchers devote their work to identifying the factors that influence it most. Bulgaria is one of the EU member states with the highest poverty levels. Regional facets of social exclusion and risks of poverty among the population are a key priority of the National Development Strategy for the third decade of 21st century. In order to mitigate the regional poverty levels it is necessary for the social policy makers to pay more attention to the various factors expected to influence these levels. Results: Poverty reduction is observed in most areas of the country. The regions with obviously favorable developments are Sofia district, Pernik, Pleven, Lovech, Gabrovo, Veliko Tarnovo, Silistra, Shumen, Stara Zagora, Smolyan, Kyustendil and others. Increased levels of poverty are found for Razgrad and Montana districts. It was fond that the reduction in the risk of poverty is associated to the increase in employment, investment, and housing. Conclusion: The social policy making needs to be aware of the fact that the degree of exposition to risk of poverty and social exclusion significantly relates to the levels of regional employment, investment and housing.
State capacity and vulnerability to natural disasters
Authors: Richard S. J. Tol
Date: 2021-04-27 00:00:00

Many empirical studies have shown that government quality is a key determinant of vulnerability to natural disasters. Protection against natural disasters can be a public good -- flood protection, for example -- or a natural monopoly -- early warning systems, for instance. Recovery from natural disasters is easier when the financial system is well-developed, particularly insurance services. This requires a strong legal and regulatory environment. This paper reviews the empirical literature to find that government quality and democracy reduce vulnerability to natural disasters while corruption of public officials increases vulnerability. The paper complements the literature by including tax revenue as an explanatory variable for vulnerability to natural disasters, and by modelling both the probability of natural disaster and the damage done. Countries with a larger public sector are better at preventing extreme events from doing harm. Countries that take more of their revenue in income taxes are better that reducing harm from natural disasters.
Climate Change Adaptation in the British Columbia Wine Industry Can carbon sequestration technology lower the B.C. Wine Industry's greenhouse gas emissions?
Authors: Lee Cartier, Svan Lembke
Date: 2021-04-27 00:00:00

The purpose of this study is to measure the benefits and costs of using biochar, a carbon sequestration technology, to reduce the B.C Wine Industry's carbon emissions. An economic model was developed to calculate the value-added for each of the three sectors that comprise the BC Wine industry. Results indicate that each sector of the wine value chain is potentially profitable, with 9,000 tonnes of CO2 sequestered each year. The study is unique in that it demonstrates that using biochar, produced from wine industry waste, to sequester atmospheric CO2 can be both profitable and environmentally sustainable.
Search and Competition with Flexible Investigations
Authors: Vasudha Jain, Mark Whitmeyer
Date: 2021-04-27 00:00:00

We modify the standard model of price competition with horizontally differentiated products, imperfect information, and search frictions by allowing consumers to flexibly acquire information about a product's match value during their visits. We characterize a consumer's optimal search and information acquisition protocol and analyze the pricing game between firms. Notably, we establish that in search markets there are fundamental differences between search frictions and information frictions, which affect market prices, profits, and consumer welfare in markedly different ways. Although higher search costs beget higher prices (and profits for firms), higher information acquisition costs lead to lower prices and may benefit consumers. We discuss implications of our findings for policies concerning disclosure rules and hidden fees.
Protectionism and economic growth: Causal evidence from the first era of globalization
Authors: Niklas Potrafke, Fabian Ruthardt, Kaspar Wüthrich
Date: 2020-10-05 00:00:00

We investigate how protectionist policies influence economic growth. Our empirical strategy exploits an extraordinary tax scandal that gave rise to an unexpected change of government in Sweden. A free-trade majority in parliament was overturned by a protectionist majority in 1887. The protectionist government increased tariffs. We employ the synthetic control method to select control countries against which economic growth in Sweden can be compared. We do not find evidence suggesting that protectionist policies influenced economic growth and examine channels why. The new tariff laws increased government revenue. However, the results do not suggest that the protectionist government stimulated the economy by increasing government expenditure.
Early Human Capital Accumulation and Decentralization
Authors: Guy Tchuente
Date: 2021-04-26 00:00:00

Decentralization is a centerpiece in Cameroonian's government institutions' design. This chapter elaborates a simple hierarchy model for the analysis of the effects of power devolution. The model predicts overall positive effects of decentralization with larger effects when the local authority processes useful information on how to better allocate the resources. The estimation of the effects of the 2010's power devolution to municipalities in Cameroon suggests a positive impact of decentralization on early human capital accumulation. The value added by decentralization is the same for Anglophone and Francophone municipalities; the effects of decentralization are larger for advanced levels of primary school.
Combining incentives for pollination with collective action to provide a bundle of ecosystem services in farmland
Authors: Jerome Faure, Lauriane Mouysset, Sabrina Gaba
Date: 2021-04-26 00:00:00

A polycentric approach to ecosystem service (ES) governance that combines individual incentives for interdependent ES providers with collective action is a promising lever to overcome the decline in ES and generate win-win solutions in agricultural landscapes. In this study, we explored the effectiveness of such an approach by focusing on incentives for managed pollination targeting either beekeepers or farmers who were either in communication with each other or not. We used a stylized bioeconomic model to simulate (i) the mutual interdependency through pollination in intensive agricultural landscapes and (ii) the economic and ecological impacts of introducing two beekeeping subsidies and one pesticide tax. The findings showed that incentives generated a spillover effect, affecting not only targeted stakeholders but non-targeted stakeholders as well as the landscape, and that this effect was amplified by communication. However, none of the simulated types of polycentric ES governance proved sustainable overall: subsidies showed excellent economic but low environmental performance, while the tax led to economic losses but was beneficial for the landscape. Based on these results, we identified three conditions for sustainable ES governance based on communication between stakeholders and incentives: (i) strong mutual interdependency (i.e. few alternatives exist for stakeholders), (ii) the benefits of communication outweigh the costs, and (iii) the incentivized ES drivers are not detrimental to other ES. Further research is needed to systematize which combination of individual payments and collaboration are sustainable in which conditions.
A Review of Disease and Development
Authors: Ruiwu Liu
Date: 2021-04-26 00:00:00

Acemoglu and Johnson (2007) put forward the unprecedented view that health improvement has no significant effect on income growth. To arrive at this conclusion, they constructed predicted mortality as an instrumental variable based on the WHO international disease interventions to analyse this problem. I replicate the process of their research and eliminate some biases in their estimate. In addition, and more importantly, we argue that the construction of their instrumental variable contains a violation of the exclusion restriction of their instrumental variable. This negative correlation between health improvement and income growth still lacks an accurate causal explanation, according to which the instrumental variable they constructed increases reverse causality bias instead of eliminating it.
To What Extent do Labor Market Outcomes respond to UI Extensions?
Authors: Aiwei Huang
Date: 2021-04-26 00:00:00

Unemployment benefits in the US were extended by up to 73 weeks during the Great Recession. Equilibrium labor market theory indicates that extensions of benefit duration impact not only search decisions by job seekers but also job vacancy creations by employers. Most of the literature focused on the former to show partial equilibrium effect that increment of unemployment benefits discourage job search and lead to a rise in unemployment. To study the total effect of UI benefit extensions on unemployment, I follow border county identification strategy, take advantage of quasi-differenced specification to control for changes in future benefit policies, apply interactive fixed effects model to deal with unobserved shocks so as to obtain unbiased and consistent estimation. I find that benefit extensions have a statistically significant positive effect on unemployment, which is consistent with the results of prevailing literature.
Whats the worth of a promise? Evaluating the indirect effects of a program to reduce early marriage in India
Authors: Shreya Biswas, Upasak Das
Date: 2021-04-25 00:00:00

One important dimension of Conditional Cash Transfer Programs apart from conditionality is the provision of continuous frequency of payouts. On the contrary, the Apni Beti Apna Dhan program, implemented in the state of Haryana in India from 1994 to 1998 offers a promised amount to female beneficiaries redeemable only after attaining 18 years of age if she remains unmarried. This paper assesses the impact of this long-term financial incentivization on outcomes, not directly associated with the conditionality. Using multiple datasets in a triple difference framework, the findings reveal a significant positive impact on years of education though it does not translate into gains in labor participation. While gauging the potential channels, we did not observe higher educational effects beyond secondary education. Additionally, impact on time allocation for leisure, socialization or self-care, age of marriage beyond 18 years, age at first birth, and post-marital empowerment indicators are found to be limited. These evidence indicate failure of the program in altering the prevailing gender norms despite improvements in educational outcomes. The paper recommends a set of complementary potential policy instruments that include altering gender norms through behavioral interventions skill development and incentives to encourage female work participation.
Weathering the Storm: How Foreign Aid and Institutions Affect Entrepreneurship Following Natural Disasters
Authors: Christopher Boudreaux, Anand Jha, Monica Escaleras
Date: 2021-04-24 00:00:00

This study examines how foreign aid and institutions affect entrepreneurship activity following natural disasters. We use insights from the entrepreneurship, development, and institutions literature to develop a model of entrepreneurship activity in the aftermath of natural disasters. First, we hypothesize the effect of natural disasters on entrepreneurship activity depends on the amount of foreign aid received. Second, we hypothesize that natural disasters and foreign aid either encourages or discourages entrepreneurship activity depending on two important institutional conditions: the quality of government and economic freedom. The findings from our panel of 85 countries from 2006 to 2016 indicate that natural disasters are negatively associated with entrepreneurship activity, but both foreign aid and economic freedom attenuate this effect. In addition, we observe that foreign aid is positively associated with entrepreneurship activity but only in countries with high quality government. Hence, we conclude that the effect of natural disasters on entrepreneurship depends crucially on the quality of government, economic freedom, and foreign aid. Our findings provide new insights into how natural disasters and foreign aid affect entrepreneurship and highlight the important role of the institutional context.
Social capital and small business productivity: The mediating roles of financing and customer relationships
Authors: Christopher Boudreaux, George Clarke, Anand Jha
Date: 2021-04-24 00:00:00
Tasks: Survey

How does an entrepreneur's social capital improve small informal business productivity? Although studies have investigated this relationship, we still know little about the underlying theoretical mechanisms driving these findings. Using a unique Zambian Business Survey of 1,971 entrepreneurs administered by the World Bank, we find an entrepreneur's social capital facilitates small business productivity through the mediating channels of firm financing and customer relationships. Our findings identify specific mechanisms that channel social capital toward an informal business' productivity, which prior studies have overlooked.
Using Satellite Imagery and Deep Learning to Evaluate the Impact of Anti-Poverty Programs
Authors: Luna Yue Huang, Solomon Hsiang, Marco Gonzalez-Navarro
Date: 2021-04-23 00:00:00

The rigorous evaluation of anti-poverty programs is key to the fight against global poverty. Traditional evaluation approaches rely heavily on repeated in-person field surveys to measure changes in economic well-being and thus program effects. However, this is known to be costly, time-consuming, and often logistically challenging. Here we provide the first evidence that we can conduct such program evaluations based solely on high-resolution satellite imagery and deep learning methods. Our application estimates changes in household welfare in the context of a recent anti-poverty program in rural Kenya. The approach we use is based on a large literature documenting a reliable relationship between housing quality and household wealth. We infer changes in household wealth based on satellite-derived changes in housing quality and obtain consistent results with the traditional field-survey based approach. Our approach can be used to obtain inexpensive and timely insights on program effectiveness in international development programs.
The Impact of Brazil on Global Grain Dynamics: A Study on Cross-Market Volatility Spillovers
Authors: Felipe Avileis, Mindy Mallory
Date: 2021-04-22 00:00:00

Brazil rose as a global powerhouse producer of soybeans and corn over the past 15 years has fundamentally changed global markets in these commodities. This is arguably due to the development of varieties of soybean and corn adapted to climates within Brazil, allowing farmers to double-crop corn after soybeans in the same year. Corn and soybean market participants increasingly look to Brazil for fundamental price information, and studies have shown that the two markets have become cointegrated. However little is known about how much volatility from each market spills over to the other. In this article we measure volatility spillover ratios between U.S. and Brazilian first crop corn, second crop corn, and soybeans. We find that linkages between the two countries increased after double cropping corn after soybeans expanded, volatility spillover magnitudes expanded, and the direction of volatility spillovers flipped from U.S. volatility spilling over to Brazil before double cropping, to Brazil spilling over to U.S. after double cropping.