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Short-time work and related measures to mitigate the consequences of a (partial) economic shutdown
Mittag, Nikolas; Pertold, Filip
2020 - English
The objective of this document is to provide a basic foundation to think about the merits, alternatives and policy design choices of short-time work policies. The first section characterizes the motivation for short-term work and the types of costs that it can help to reduce or cause. The second section briefly overviews key policy alternatives and their merits, to lay out where short-time work has the potential to be useful, and what alternative tools can amend or replace it. This is followed by an overview of short-time work policies from the last recession and key lessons learned from that experience. The document closes with an overview of short-time work policies already enacted in response to the current economic situation. The main aim of this document is to draw general policy conclusions for the current situation in the Czech Republic based on the reviews and considerations in the first two sections. Section 3 will attempt to do so. Readers who are primarily interested in specific policies or those familiar with the literature on short-time work may want to go straight to Section 3.
Keywords:
COVID-19; Czech Republic
Available in digital repository of the ASCR
Short-time work and related measures to mitigate the consequences of a (partial) economic shutdown
The objective of this document is to provide a basic foundation to think about the merits, alternatives and policy design choices of short-time work policies. The first section characterizes the ...
Capital income taxation with portfolio choice
Bakota, Ivo
2020 - English
This paper analyzes redistributional and macroeconomic effects of differential taxation of financial assets with a different risk levels. The redistributive effect stems from the fact that various households hold portfolios with a starkly different risk levels. In particular, poor households primarily save in safe assets, while rich households often invest a substantially higher share of their wealth in (risky) equity. At the same time, equity and safe assets are often taxed at different rates in many tax codes. This is primarily because investments in equity (which are relatively riskier) are taxed both as corporate and personal income, unlike debt, which is tax deductible for corporations. This paper firstly builds a simple theoretical two-period model which shows that the optimal tax wedge between risky and safe assets is increasing in the underlying wealth inequality. Furthermore, I build a quantitative model with a continuum of heterogeneous agents, parsimonious life-cycle, borrowing constraint, aggregate shocks and uninsurable idiosyncratic shocks, in which the government raises revenue by using linear taxes on risky and safe assets. Simulations of quantitative models shows that elimination of differential asset taxation leads to a welfare loss equivalent to a 0.3% permanent reduction in consumption. I find that the optimal tax wedge between taxes on equity and debt is higher than the one in the U.S. tax code.\n
Keywords:
portfolio choice; optimal taxation; redistribution
Fulltext is available at external website.
Capital income taxation with portfolio choice
This paper analyzes redistributional and macroeconomic effects of differential taxation of financial assets with a different risk levels. The redistributive effect stems from the fact that various ...
Firm life cycle and cost of debt
Amin, A.; Bowler, B.; Hasan, M. M.; Lobo, G. L.; Trešl, Jiří
2020 - English
This paper examines the relation between the corporate life cycle and lending spreads. Using a sample of 20,307 firm-loan observations spanning 5,076 publicly traded U.S. firms, we find that lending spreads follow a U-shape pattern across the life cycle phases. This pattern is in addition to the variation explained by typical controls. In a multivariate analysis, we find that firms in the introduction and decline phases pay lending spreads that are greater than firms in the mature phase (differences of 6 percent and 12 percent, respectively). We explore omitted variables bias and instrumental variable estimation in robustness testing and find that the shape pattern persists. Our findings are consistent with theoretical predictions regarding the relationship between the corporate life cycle and various lending risks.
Keywords:
firm life cycle; cost of debt; bank loans
Fulltext is available at external website.
Firm life cycle and cost of debt
This paper examines the relation between the corporate life cycle and lending spreads. Using a sample of 20,307 firm-loan observations spanning 5,076 publicly traded U.S. firms, we find that lending ...
Private and public IPR protection in a vertically differentiated software duopoly
Žigić, Krešimir; Střelický, J.; Kúnin, Michael
2020 - English
We study the interaction between public and private intellectual property rights (IPR) protection in a duopoly in which software developers offer a product variety of differing quality and compete for heterogeneous users, who have an option to buy a legal version, possibly use an illegal copy, or not buy a product at all. Illegal usage implies violation of IPR and is punishable. A developer may use private IPR protection for his software if the level of piracy is high. An important intermediate step in our analysis addresses firms’ pricing strategies and the analysis of the impact of both private and public IPR protection on these strategies (with monopoly serving as a benchmark case). Last but not least, we make some comparisons with an analogous model based on horizontal product differentiation.
Keywords:
vertically differentiated duopoly; software piracy; Bertrand competition
Fulltext is available at external website.
Private and public IPR protection in a vertically differentiated software duopoly
We study the interaction between public and private intellectual property rights (IPR) protection in a duopoly in which software developers offer a product variety of differing quality and compete for ...
Talent rewards, talent uncertainty, and career tracks
Jeong, Byeongju
2020 - English
I present a model in which (1) a more talent-demanding task increases both rewards for high talent and the penalty for low talent due to a greater fixed cost of production, and (2) individual talent is task-specific and talent updates occur only for tasks near the attempted task, which implies a task-sequence problem in which the initial task constrains subsequent task choices. Rising talent rewards and penalty stemming from a rising scale economy\nmotivate young workers to choose a more talent-demanding task, raise the failure rate (i.e., the probability of the updated talent being lower than the exit threshold), and concentrate income gains in a diminishing fraction of high-talent workers. Rising talent rewards and penalty also increase the share of young workers subject to binding minimum currentincome constraints, thus increasing the dispersion of tasks among young workers. The model sheds light on the rising stratification of careers among young workers and the rising polarization of the residual labor income distribution (i.e., the labor income distribution controlling for observable worker characteristics such as education and age).
Keywords:
career track; talent reward; talent uncertainty
Fulltext is available at external website.
Talent rewards, talent uncertainty, and career tracks
I present a model in which (1) a more talent-demanding task increases both rewards for high talent and the penalty for low talent due to a greater fixed cost of production, and (2) individual talent ...
Do women face a glass ceiling at home? The division of household labor among dual-earner couples
Lichard, Tomáš; Pertold, Filip; Škoda, S.
2020 - English
In this paper we ask how the division of household labor varies across heterosexual dual-earner couples with different relative wages with a focus on differences between Southern and Western Europe. Using the EU Statistics on Income and Living Conditions we first show that high income married or cohabiting women do twice as much housework as single women in Southern Europe. Further, their time spent in household production relative to their spouses’ time in Southern Europe is the same regardless of their relative wages, while in Western Europe we find positive elasticity of substitution in household production with respect to relative wages. We thus present positive evidence for the presence of a “second-shift” that women face in Southern Europe, which may stem from regional gender norms. Our findings hold after instrumenting for relative wages using the relative wages of similar socio-economic groups in other countries.
Keywords:
household production; division of labor; gender gap
Fulltext is available at external website.
Do women face a glass ceiling at home? The division of household labor among dual-earner couples
In this paper we ask how the division of household labor varies across heterosexual dual-earner couples with different relative wages with a focus on differences between Southern and Western Europe. ...
Intra-industry transfer of information inferred from trading volume
Brushko, Iuliia; Ferris, S. P.; Hanousek, Jan; Trešl, Jiří
2020 - English
This study examines the responsiveness of trading volume to a firm’s earnings announcements. We find that the volume and earnings surprise information generated at the first earnings announcement within an industry help to explain the stock returns of the non-announcing firm. Specifically, it explains their equity performance at the time of the first industry announcement and then again after their own earnings announcement. These results provide novel insights into how earnings announcements contain both firm specific as well as industry information that is value relevant for investors.
Keywords:
intra-industry; earnings announcement; earnings surprise
Fulltext is available at external website.
Intra-industry transfer of information inferred from trading volume
This study examines the responsiveness of trading volume to a firm’s earnings announcements. We find that the volume and earnings surprise information generated at the first earnings announcement ...
Optimal menu when agents make mistakes
Mikhalishchev, Sergei
2020 - English
This paper studies a welfare maximization problem with heterogeneous agents. A social planner designs a menu of choices for agents who misperceive either the properties of options or their own preferences. When agents misperceive the true properties of alternatives, it is optimal to limit a menu when the probability of a mistaken choice is moderately high. Additionally, it could be optimal to construct the menu with more distinct alternatives. However, when agents misperceive their own tastes, it is optimal to limit choice only when agents choose randomly, and to propose alternatives that are more similar when there is a greater probability of agents making a mistake.
Keywords:
discrete choice; optimal menu; bounded rationality
Fulltext is available at external website.
Optimal menu when agents make mistakes
This paper studies a welfare maximization problem with heterogeneous agents. A social planner designs a menu of choices for agents who misperceive either the properties of options or their own ...
Using survey questions to measure preferences: lessons from an experimental validation in Kenya
Bauer, Michal; Chytilová, Julie; Miguel, E.
2020 - English
Can a short survey instrument reliably measure a range of fundamental economic preferences across diverse settings? We focus on survey questions that systematically predict behavior in incentivized experimental tasks among German university students (Becker et al. 2016) and were implemented among representative samples across the globe (Falk et al. 2018). This paper presents results of an experimental validation conducted among low-income individuals in Nairobi, Kenya. We find that quantitative survey measures -- hypothetical versions of experimental tasks -- of time preference, attitude to risk and altruism are good predictors of choices in incentivized experiments, suggesting these measures are broadly experimentally valid. At the same time, we find that qualitative questions -- self-assessments -- do not correlate with the experimental measures of preferences in the Kenyan sample. Thus, caution is needed before treating self-assessments as proxies of preferences in new contexts.\n
Keywords:
preference measurement; experiment; survey
Fulltext is available at external website.
Using survey questions to measure preferences: lessons from an experimental validation in Kenya
Can a short survey instrument reliably measure a range of fundamental economic preferences across diverse settings? We focus on survey questions that systematically predict behavior in incentivized ...
On policy evaluation with aggregate time-series shocks
Arkhangelsky, D.; Korovkin, Vasily
2020 - English
We propose a general strategy for estimating treatment effects, in contexts where the only source of exogenous variation is a sequence of aggregate time-series shocks. We start by arguing that commonly used estimation procedures tend to ignore the crucial time-series aspects of the data. Next, we develop a graphical tool and a novel test to illustrate the issues of the design using data from influential studies in development economics [Nunn and Qian, 2014] and macroeconomics [Nakamura and Steinsson, 2014]. Motivated by these studies, we construct a new estimator, which is based on the time-series model for the aggregate shock. We analyze the statistical properties of our estimator in the practically relevant case, where both cross-sectional and time-series dimensions are of similar size. Finally, to provide causal interpretation for our estimator, we analyze a new causal model that allows taking into account both rich unobserved heterogeneity in potential outcomes and unobserved aggregate shocks.
Keywords:
continuous difference in differences; panel data; causal effects
Fulltext is available at external website.
On policy evaluation with aggregate time-series shocks
We propose a general strategy for estimating treatment effects, in contexts where the only source of exogenous variation is a sequence of aggregate time-series shocks. We start by arguing that ...
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