Working papers

Abstract We show that least squares cross-validation (CV) methods share a common structure which has an explicit asymptotic solution, when the chosen kernel is asymptotically separable in bandwidth and data. For density estimation with a multivariate Student t(ν) kernel, the CV criterion becomes asymptotically equivalent to a polynomial of only three terms. Our bandwidth formulae are simple and non-iterative (leading to very fast computations), their integrated squared-error dominates traditional CV implementations, they alleviate the notorious sample variability of CV, and overcome its breakdown in the case of repeated observations. We illustrate with univariate and bivariate applications, of density estimation and nonparametric regressions, to a large dataset of Michigan State University academic wages and experience.
Keywords Academic Wages, Nonparametric density estimation, Explicit analytical solution, Cross Validation, Bandwidth choice
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Abstract This paper is essentially based on the assumption that policies supporting investment in intermittent renewable technologies cannot be contingent on meteorological events causing this intermittence. This decision was taken by most policymakers to avoid overly complex policy prescriptions. But in doing so, the first-best energy mix may be out of reach. We compare, in a unified second-best setting, the feed-in tariff, renewable premiums and tradable green certificates policy. We consider a "two-period, S-state" model. The S states reflect intermittency. Production decisions for renewable electricity are taken prior to the resolution of the uncertainty while the fossil-fuel sector adjusts its decision in each state. Retailers buy electricity on a state-dependent wholesale market which they deliver to consumers according to a fixed-tariff or a real-time-pricing contract. All these elements matter in the efficiency assessment of these policies.
Keywords Intermittency, Renewables, Feed-in tariff, Premiums for renewable, Tradable green certificates
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Abstract This paper first provides empirical evidence that labour market outcomes for the less educated workers, who also tend to be poorer, are substantially more volatile than those for the well-educated, who tend to be richer. We estimate job finding rates and separation rates by educational attainment for several European countries and find that job finding rates are smaller and separation rates larger at lower educational attainment levels. At cyclical frequencies, fluctuations of the job finding rate explain up to 80% of unemployment fluctuations for the less educated. We then construct a stylised HANK model augmented with search and matching and ex-ante heterogeneity in terms of educational attainment. We show that monetary policy has stronger effects when the job market for the less educated and, hence, poorer workers is more volatile. The reason is that these workers have the most procyclical income coupled with the highest marginal propensity to consume. An expansionary monetary policy shock that increases labour demand disproportionally affects the labour market segment for the less educated, causing a strong increase in consumption. This further amplifies labour demand and increases the labour income of the poor even more, amplifying the initial effect. The same mechanism carries over to forward guidance.
Keywords Employment, Business Cycles, Monetary policy, Search and matching, Heterogeneous agents
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Abstract This paper computes lifetime earnings (LTE) in France for the 1967 to 1987 entry cohorts and compares our results with the US. Median LTE in France increased moderately for both genders, in contrast to the US where men's LTE declined and women's rose sharply. We also examine some of the factors driving the dynamics of LTE in France. We find that education plays a key role in shaping LTE across cohorts, place of birth has a large influence on lifetime earnings, and differences in working time explain a larger share of the gender gap for younger than for older cohorts.
Keywords Gender earnings gaps, Inequality, Lifetime earnings
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Abstract The Syrian refugee crisis is one of the significant humanitarian challenges of the 21st century, and Turkey is among the countries significantly impacted. This study analyzes the impact of the approximately 3.65 million Syrian refugees residing in Turkey on economic development proxied by GDP per capita. Since Turkish provinces faced distinctive rises in refugee numbers after the Syrian Civil War, I exploit the differences in the proportion of refugees across different Turkish provinces to estimate refugees' impact on economic development using a difference-indifferences methodology. To address the potential selection bias arising from the refugees' settlement patterns, I employ a two-stage least squares (2SLS) method. Results offer suggestive evidence of a positive medium-term effect and a negative long-term effect of the arrival of refugees on economic development, while the short-term effect is unclear. However, none of the impacts are statistically significant.
Keywords Instrumental variable, GDP per capita, Difference-in Differences, Regional Variation, Economic development, Refugees
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Abstract The Balassa-Samuelson effect is still an important phenomenon in the theory of economic development, as Balassa states, "As economic development is accompanied by greater inter-country differences in the productivity of tradable goods, differences in wages and service prices increase, and correspondingly so do differences in purchasing power parity and exchange rates." To the best of our knowledge, the Balassa-Samuelson effect has not been formally examined in the framework of optimal growth theory. By embedding the Balassa-Samuelson's original model in an optimal growth model setting, we investigate the validity of the Balassa-Samuelson effect in such a case and show that the Balassa-Samuelson effect follows from one of the properties of the optimal steady state.
Keywords Two sector optimal growth, Optimal steady state, Saddle-point stability, Phase diagram, Hamiltonian, Capital intensity
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Abstract In this paper, I introduce a novel methodology to conduct surveys. The priced survey methodology (PSM). Like standard surveys, priced surveys are easy to implement, and measure social preferences on numerical scales. The PSM's design draws inspiration from consumption choice experiments, as respondents fill out the same survey several times under different choice sets. I extend Afriat's theorem and show that the Generalized Axiom of Revealed Preferences is necessary and sufficient for the existence of a concave, continuous, and single-peaked utility function rationalizing answers to the PSM. I apply the PSM to a sample of online participants and show that most respondents are rational when answering the PSM. I estimate respondents' single-peaked utility functions and draw several implications on their social preferences.
Keywords Survey, Behavioral economics, Social preferences, Revealed Preference, Decision Theory
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Abstract The Balassa-Samuelson effect ("BS effect") has attracted attention as a theory to explain the stagnation of the Japanese economy over the past 30 years. In particular, it has been used to explain the long-term depreciation of the real effective exchange rate since 1995. Furthermore, macroeconomic data show that the BS effect explains well Japan's long-term economic stagnation. However, the BS effect was originally derived theoretically for small open economies, not for large economies like Japan. In other words, the BS effect cannot be theoretically applied to large economies. This is a serious problem in applying the BS effect empirically. In this paper, we embed Balassa-Samuelson's original argument into the optimal growth theory framework. That is, we set up an optimal growth problem for large countries. It is then shown that there exists a stable optimal steady state and that the BS effect is more directly valid in that optimal steady state. In other words, as a long-run property, the BS effect is applicable to large as well as small countries, although, contrary to the small open economy case, it does not depend on the capital shares of the two sectors.
Keywords Balassa-Samuelson effect, Capital intensity, Optimal steady state, Two-sector optimal growth models
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Abstract To what extent protectionism affects growth and (de)stabilizes the economies? Since 2018, some countries have resorted to protectionist measures as the United States. Although the impacts of protectionism on growth have been widely explored without reaching a consensus, few has been said on its impacts on macroeconomic stability. The present paper attempts to gauge more precisely its implications using a Barro-type (1990) endogenous growth model with public debt and credit constraint where tariffs are a proxy of protectionism. Our main result is to show that when the debt level is high, and the share of foreign goods in total consumption is large enough, increasing tariffs may have a dramatic destabilizing effect generating some expectation coordination failure between multiple equilibria and the possible existence of large self-fulfilling fluctuations. We also exhibit some trade-off between tariffs and growth as tariffs are beneficial only to the low growth equilibrium which may only appear in the globally indeterminate case. We also propose some numerical illustrations confirming the destabilizing impact of tariffs in the case of the US economy. We finally propose an Event Study analysis to confront our results. While our effects appear short lasting, two quarters, we show that the implementation of protectionism destabilizes the US economy in the short run.
Keywords Global and local indeterminacy, Credit constraint, Small open economy, Tariffs, Public debt
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Abstract When can exogenous changes in beliefs generate endogenous fluctuations in rational expectation models? We analyze this question in the canonical one-sector and two-sector models of the business cycle with increasing returns to scale. A key feature of our analysis is that we express the uniqueness/multiplicity condition of equilibirum paths in terms of restrictions on five critical and economically interpretable parameters: the Frisch elasticities of the labor supply curve with respect to the real wage and to the marginal utility of wealth, the intertemporal elasticity of substitution in consumption, the elasticity of substitution between capital and labor, and the degree of increasing returns to scale. We obtain two clear-cut conclusions: belief-driven fluctuations cannot exist in the one-sector version of the model for empirically consistent values for these five parameters. By contrast, belief-driven fluctuations are a robust property of the twosector version of the model-with differentiated consumption and investment goods-, as they now emerge for a wide range of parameter values consistent with available empirical estimates. The key ingredients explaining these different outcomes are factor reallocation between sectors and the implied variations in the relative price of investment, affecting the expected return on capital accumulation.
Keywords Belief-driven business cycles, Endogenous fluctuations, Expectations, Income effect
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