pwc-archive/papers-with-abstracts huggingface dataset:
Two Level Nested and Sequential Logit
Authors: Davide Luparello
Date: 2025-03-25 00:00:00
Tasks: Discrete Choice Models

This technical note provides comprehensive derivations of fundamental equations in two-level nested and sequential logit models for analyzing hierarchical choice structures. We present derivations of the Berry (1994) inversion formula, nested inclusive values computation, and multi-level market share equations, complementing existing literature. While conceptually distinct, nested and sequential logit models share mathematical similarities and, under specific distributional assumptions, yield identical inversion formulas-offering valuable analytical insights. These notes serve as a practical reference for researchers implementing multi-level discrete choice models in empirical applications, particularly in industrial organization and demand estimation contexts, and complement Mansley et al. (2019).
Forecasting Impacts to the Forest Sector: An Analysis of Key U.S. States and Industries
Authors: Adam Daigneault, Jonathan Gendron
Date: 2025-03-30 00:00:00

Several key states in various regions have experienced recent sawtimber as well as pulp and paper mill closures, which have resulted in harmful effects to rural, natural-resource dependent communities. This raises an important research question, how will key macroeconomic and related variables for the U.S. forest sector change in the future for highly forest-dependent states? To address this, we employ a vector error correction (VEC) model to forecast economic trends in three major industries - forestry and logging, wood manufacturing, and paper manufacturing - across six of the most forest-dependent states in the U.S.: Alabama, Arkansas, Maine, Mississippi, Oregon, and Wisconsin. The forecasting results imply that the forestry and logging industry will largely experience decreases in employment and the number of firms. Wood manufacturing has similar findings, but employment is forecasted to increase in general. Paper manufacturing is forecasted to decrease employment, output, and the number of firms, while wages will remain constant. The analysis highlights how timber-based manufacturing communities may be more resilient than other forestry-based industries in the face of economic disruptions. This type of regional forecasting provides valuable insights for regional policy makers and industry stakeholders, helping them anticipate economic shifts and implement strategies to support affected communities. In addition, the methodology applied in this study can be extended to other non-forestry industries that serve as economic pillars for specific regions such as mining, agriculture, and energy production, offering a framework for assessing economic resilience in resource-dependent communities.
Reinterpreting demand estimation
Authors: Jiafeng Chen
Date: 2025-03-30 00:00:00
Tasks: Causal Inference, counterfactual

This paper connects the literature on demand estimation to the literature on causal inference by interpreting nonparametric structural assumptions as restrictions on counterfactual outcomes. It offers nontrivial and equivalent restatements of key demand estimation assumptions in the Neyman-Rubin potential outcomes model, for both settings with market-level data (Berry and Haile, 2014) and settings with demographic-specific market shares (Berry and Haile, 2024). This exercise helps bridge the literatures on structural estimation and on causal inference by separating notational and linguistic differences from substantive ones.
Forward Selection Fama-MacBeth Regression with Higher-Order Asset Pricing Factors
Authors: Nicola Borri, Denis Chetverikov, Yukun Liu, Aleh Tsyvinski
Date: 2025-03-30 00:00:00
Tasks: regression

We show that the higher-orders and their interactions of the common sparse linear factors can effectively subsume the factor zoo. To this extend, we propose a forward selection Fama-MacBeth procedure as a method to estimate a high-dimensional stochastic discount factor model, isolating the most relevant higher-order factors. Applying this approach to terms derived from six widely used factors (the Fama-French five-factor model and the momentum factor), we show that the resulting higher-order model with only a small number of selected higher-order terms significantly outperforms traditional benchmarks both in-sample and out-of-sample. Moreover, it effectively subsumes a majority of the factors from the extensive factor zoo, suggesting that the pricing power of most zoo factors is attributable to their exposure to higher-order terms of common linear factors.
Estimation of Latent Group Structures in Time-Varying Panel Data Models
Authors: Paul Haimerl, Stephan Smeekes, Ines Wilms
Date: 2025-03-29 00:00:00

We introduce a panel data model where coefficients vary both over time and the cross-section. Slope coefficients change smoothly over time and follow a latent group structure, being homogeneous within but heterogeneous across groups. The group structure is identified using a pairwise adaptive group fused-Lasso penalty. The trajectories of time-varying coefficients are estimated via polynomial spline functions. We derive the asymptotic distributions of the penalized and post-selection estimators and show their oracle efficiency. A simulation study demonstrates excellent finite sample properties. An application to the emission intensity of GDP highlights the relevance of addressing cross-sectional heterogeneity and time-variance in empirical settings.
Inference on effect size after multiple hypothesis testing
Authors: Andreas Dzemski, Ryo Okui, Wenjie Wang
Date: 2025-03-28 00:00:00
Tasks: valid

Significant treatment effects are often emphasized when interpreting and summarizing empirical findings in studies that estimate multiple, possibly many, treatment effects. Under this kind of selective reporting, conventional treatment effect estimates may be biased and their corresponding confidence intervals may undercover the true effect sizes. We propose new estimators and confidence intervals that provide valid inferences on the effect sizes of the significant effects after multiple hypothesis testing. Our methods are based on the principle of selective conditional inference and complement a wide range of tests, including step-up tests and bootstrap-based step-down tests. Our approach is scalable, allowing us to study an application with over 370 estimated effects. We justify our procedure for asymptotically normal treatment effect estimators. We provide two empirical examples that demonstrate bias correction and confidence interval adjustments for significant effects. The magnitude and direction of the bias correction depend on the correlation structure of the estimated effects and whether the interpretation of the significant effects depends on the (in)significance of other effects.
Surge sourcing via hybrid supply in a sharing economy: a resource-efficient, progressive and sustainable way to satisfy surge demand
Authors: Pouria Mohamadzadehoqaz, Elena Dieckmann, Anthony Quinn, Robert Shorten
Date: 2025-03-31 00:00:00

We propose a surge sourcing approach to address occasional synchronous high demand (surge demand) in sharing economy systems, providing a socio-economically progressive alternative to surge pricing. Instead of suppressing demand among disadvantaged consumers, our scheme increases supply by involving privileged consumer-providers (prosumers) who under-utilize their resources. This hybrid supply approach maintains high quality-of-service (QoS) for both consumers and prosumers in both normal and surge demand situations without surge pricing. To ensure prosumer QoS, we reserve a small portion of the primary supply to meet their needs if their resources become unavailable during surge periods. As the probability of such events is low compared to that of the surge demand itself, the reserved resources required are minimal. The resulting scheme is resource-efficient, socially progressive, and sustainable, exploiting under-used resources. We illustrate our scheme through two applications: high-range car sharing for owners of small EVs, and shared charging points for EV drivers.
Foreign Direct Investment and Job Creation in EU Regions
Authors: Marjan Petreski, Magdalena Olczyk
Date: 2025-03-31 00:00:00
Tasks: Management

This study examines the impact of foreign direct investment (FDI) on job creation across 109 regions in the old EU member states from 2012 to 2023. Using dynamic and spatial econometric models combined with a unique dataset of FDI projects, we find that increased FDI inflows significantly enhance regional job creation, but the relationship is nonlinear. Sectoral specialization plays a crucial role, as more concentrated FDI inflows lead to higher employment growth. Furthermore, FDI-driven job creation exhibits significant spatial spillover effects. However, regions attracting high-value FDI jobs, such as those in R&D and management, tend to experience slower overall employment growth.
Ambitious forest biodiversity conservation under scarce public funds: Introducing a deferrence mechanism to conservation auctions
Authors: Johanna Kangas, Janne S. Kotiaho, Markku Ollikainen
Date: 2025-03-31 00:00:00

The European Union's Biodiversity Strategy sets an ambitious goal to increase the area of protected land and sea to 30% with 10% devoted to strict protection by 2030. The large land areas required to fulfil the conservation target and the quick schedule of implementation challenge both the current policy instruments and public funding for conservation. We introduce a deferrence mechanism for forest conservation by using procurement auctions. Deferring the conservation payments allows the government to conserve large areas in a quicker schedule and distributing the financial burden of conservation cost for a longer period of time. The deferred payments are paid an interest. The interest earning and an auction mechanism for downpayments strengthens the incentives for landowners to take part in conservation. We characterize the general properties of the mechanism and run numerical simulations to find that the deferrence mechanism facilitates a quick conservation of stands and thereby minimizes the loss of ecologically valuable sites caused by harvesting risks. The analysis suggests that keeping the lending period no longer than 10 years and paying a 3% interest rate provides a compromise that works rather well and outperforms the up-front mechanism in most cases.
Scenarios for the Deployment of Automated Vehicles in Europe
Authors: Louison Duboz, Ioan Cristinel Raileanu, Jette Krause, Ana Norman-López, Matthias Weitzel, Biagio Ciuffo
Date: 2025-03-31 00:00:00

The deployment of Automated Vehicles (AVs) is expected to address road transport externalities (e.g., safety, traffic, environmental impact, etc.). For this reason, a legal framework for their large-scale market introduction and deployment is currently being developed in the European Union. Despite the first steps towards road transport automation, the timeline for full automation and its potential economic benefits remains uncertain. The aim of this paper is twofold. First, it presents a methodological framework to determine deployment pathways of the five different levels of automation in EU27+UK to 2050 under three scenarios (i.e., slow, medium baseline and fast) focusing on passenger vehicles. Second, it proposes an assessment of the economic impact of AVs through the calculation of the value-added. The method to define assumptions and uptake trajectories involves a comprehensive literature review, expert interviews, and a model to forecast the new registrations of different levels of automation. In this way, the interviews provided insights that complemented the literature and informed the design of assumptions and deployment trajectories. The added-value assessment shows additional economic activity due to the introduction of automated technologies in all uptake scenarios.
When do firms sell high durability products? The case of light bulb industry
Authors: Takeshi Fukasawa
Date: 2025-03-31 00:00:00

This study empirically investigates firms' incentives on the choice of product durability, and its social optimality, by developing a dynamic structural model of durable goods with forward-looking consumers and oligopolistic multi-product firms. Based on the observations of the light bulb market, it specifies a model where firms produce multiple products with different durability levels and set product prices based on dynamic incentives. It proposes and applies novel estimation algorithms that alleviate the computational burden and data requirement for estimating demand and marginal cost parameters of dynamic demand models. Using light bulb market data in Japan, structural parameters are estimated. This study obtains the following results. First, large firms have incentives to collude to eliminate high durability incandescent lamps, though it is profitable to sell them for each firm. In contrast, when they can collude on prices, they don't have incentives to eliminate high durability bulbs. Second, eliminating high durability incandescent lamps leads to larger producer and total surplus, though it leads to lower consumer surplus.
Career Incentives, Risk-Taking, and Sorting Dynamics: Evidence from Top Financial Advisers
Authors: Jun Honda
Date: 2025-03-31 00:00:00

We examine how career concerns influence the behavior and mobility of financial advisers. Drawing on a uniquely comprehensive matched panel that combines employer-employee data with a longstanding national ranking, our study tests predictions from classic career concerns models and tournament theory. Our analysis shows that, in the early stages of their careers, advisers destined for top performance differ significantly from their peers. Specifically, before being ranked, these advisers are twice as likely to obtain a key investment license, experience customer disputes at rates up to seven times higher, and transition to firms with 80% larger total assets. Moreover, we find that top advisers mitigate the potential costs of their higher risk-taking by facing reduced labor market penalties following disciplinary actions. Leveraging exogenous variation from the staggered adoption of the Broker Protocol through an event-study framework, our results reveal dynamic sorting: firms attract high-performing advisers intensely within a short post-adoption period. These findings shed new light on the interplay between career incentives, risk-taking, and labor market outcomes in the financial services industry, with important implications for both firm performance and regulatory policy.
The optimum mix of storage and backup in a highly renewable, highly reliable European electricity grid
Authors: J. Dunsmore, L. M. Arthur, R. S. Kemp
Date: 2025-03-30 00:00:00

We estimate the variability of solar and wind energy generation potential in Europe over a 43 year period between 1980-2022 with the MERRA-2 reanalysis datasets. We compare the estimated supply potential to hourly demand data from 36 European countries to calculate the reliability of a highly renewable electricity grid in Europe. We find that in cost-optimised scenarios with onshore wind, solar and storage, but no natural gas, reliably meeting the last 1% of demand represents 36% of the entire system cost. Including small amounts of dispatchable natural gas drastically reduces the cost of a renewable, highly reliable grid: overall system costs fall by 31% when just 1% of total generation is permitted to come from natural gas. Large renewable overbuild factors (greater than $\times$4 peak demand) are required to meet modern grid reliability standards in all scenarios, and wind, rather than solar, dominates the generation mix.
Are Bushmeat Hunters Profit Maximizers or Simply Brigands of Opportunity?
Authors: Wayne A. Morra, Gail W. Hearn, Andrew J. Buck
Date: 2025-03-30 00:00:00

Bushmeat hunters on Bioko Island, Equatorial Guinea use shotguns and snares to capture wild arboreal and ground animals for sale in the Malabo Bushmeat market. Two tools for the analysis of economic efficiency, the production possibilities frontier and isorevenue line, can be used to explain the post hoc changing spatial distribution of takeoff rates of bushmeat. This study analyzes changes in technical efficiencies over time and in different locations for the open access wildlife hunted on Bioko for the last ten years. Due to inadequate refrigeration in the field and the bushmeat market, animals must be sold quickly. The result is a takeoff distribution that is not efficient, consequently too many of the wrong species of animals are harvested. The larger, slower-breeding mammals, such as monkeys disappear before the smaller, faster-breeding mammals, such as blue duikers and pouched rats, promoting a steepening of the production possibilities frontier, inducing a greater takeoff of monkeys than the expected efficient level. Soon after hunters penetrate into a new area, the relative selling price of monkeys exceeds the rate of transformation between ground animals and arboreal animals triggering inefficient and unsustainable harvests
Google and China's Trade
Authors: Cui Hu, Ben G. Li
Date: 2025-03-30 00:00:00

Although Google is blocked in China, Chinese provinces export significantly more to foreign countries that recently searched for them (up to 12 months prior). This attention premium is found mainly at the extensive margin of exports, larger in products that are relatively homogeneous, substitutable, and upstream in the production process, and more pronounced during the COVID pandemic and during the holiday season. The attention premium is not found for Chinese imports from the rest of the world. Our findings attest to online attention as a scarce resource in international trade allocated by importers.
Labor Market Impact on Homelessness: Evidence from Canadian Administrative Data on Shelter Usage
Authors: Damba Lkhagvasuren, Purevdorj Tuvaandorj
Date: 2025-03-30 00:00:00

The overwhelming majority of homeless individuals are jobless, despite many expressing a willingness to work. While this strong individual-level link between homelessness and unemployment is well-documented, the broader impact of labor market dynamics on homelessness remains largely unexplored. To fill this gap, this paper investigates the impact of local labor market conditions on the duration of homelessness, using individuals' homeless shelter usage records as a proxy for measuring their homelessness duration. Specifically, drawing on Canada's National Homelessness Information System data from 2014 to 2017, we analyze how local employment growth and changes in the local employment rate affect shelter usage duration. Our findings reveal that a 1% increase in local employment is associated with a 0.11-quarter (approximately 0.33-month) reduction in the average duration of shelter usage, while a 1% rise in the local employment rate leads to a 0.34-quarter (approximately 1.02-month) reduction. These changes correspond to decreases of 2.9% and 8.9%, respectively, in the average duration of shelter stays. The findings underscore the critical role of employment opportunities in reducing homelessness and lend support to job-oriented policy interventions for the homeless. In addition, the results suggest that demographic disparities-particularly the overrepresentation of Indigenous people and men among the homeless-are partially explained by slower exit rates from homelessness within these groups.
Delayed Detection, Swift Blame: Investor Responses to Advisor Misconduct in Market Downturns
Authors: Jun Honda
Date: 2025-03-29 00:00:00

Financial misconduct in advisory services persists despite ongoing regulatory oversight, raising important questions about its endurance and the nature of retail investor responses. Using detailed FINRA BrokerCheck data - capturing the time from the initiation of misconduct to its detection - we document pronounced heterogeneity in detection lags. Although detection is generally delayed, our analysis reveals that investor responses are markedly swifter during market downturns, suggesting that substantial portfolio losses prompt investors to quickly assign blame to their advisors. These findings contribute to our understanding of how adverse economic environments can trigger more immediate investor reactions, even when overall detection remains sluggish.
Community-driven and water quality indicators of sanitation system failures in a rural U.S. community
Authors: Lorelay Mendoza Grijalva, Allisa G. Hastie, Meili Gong, Brenda Rojas Cala, Brandon Hunter, Stephanie Wallace, Rojelio Mejia, Catherine Flowers, Khalid K. Osman, William A. Tarpeh
Date: 2025-03-29 00:00:00

Safe sanitation access is commonly believed to be ubiquitous in high-income countries; however, researchers and community advocates have exposed a glaring lack of access for many low-income communities and communities of color across the U.S. While this disparity has been identified and quantified at a high level, local and household-level implications of sanitation failures remain ill-defined. We develop a set of user-based and environmental measures to assess the performance of centralized wastewater systems, septic systems, and straight-piped systems in Lowndes County, Alabama. We combine qualitative, survey, and environmental sampled data to holistically compare user experiences across infrastructure types. This integrated approach reveals new routes of exposure to wastewater through informal household maintenance and system backups and provides evidence for the spread of wastewater-like contamination throughout the community. This work elucidates the severity of sanitation failures in one rural U.S. community and provides a framework to assess sanitation quality in other contexts with limited sanitation access in high-income countries.
An Inverse-Ramsey Tax Rule
Authors: Luca Micheletto, Dylan Moore, Daniel Reck, Joel Slemrod
Date: 2025-03-28 00:00:00

Traditional optimal commodity tax analysis, dating back to Ramsey (1927), prescribes that to maximize welfare one should impose higher taxes on goods with lower demand elasticities. Yet policy makers do not stress minimizing efficiency costs as a desideratum. In this note we revisit the commodity tax problem, and show that the attractiveness of the Ramsey inverse-elasticity prescription can itself be inverted if the tax system is chosen -- or at least strongly influenced -- by taxpayers who are overly confident of their ability, relative to others, to substitute away from taxed goods.
Pareto-Nash Allocations under Incomplete Information: A Model of Stable Optima
Authors: Alfred A. B. Mayaki
Date: 2025-03-28 00:00:00

Prior literature on two-firm two-market and two-stage extended dynamic models has introduced what Guth (2016) succinctly terms a social dilemma. A state in which conglomerate firms competing in a Bertrand duopoly consider jointly optimizing profits under a tacit self-enforcing agreement to deter market entry. This theoretical article reinterprets the social dilemma highlighted by Guth (2016) not only in the context of allocation but also through the lens of competition where entry must legally be permitted even if cooperative signalling would otherwise sustain joint profitability. This study explores the significance of a sufficiency condition on each firm's non-instantaneous reaction function requiring the maintenance of a stable long-run equilibrium through retaliative restraint characterized by either two negative eigenvalues or a saddle-path trajectory.