Internal Lunch Seminars

(Cake will be available from 12:40 with the seminar starting promptly at 12:50)

Abstract: The theoretical models suggest there is a negative relationship between social capital and migration (Glaeser et al 2002, David et al 2010, Bräuninger and Tolciu 2011). The simultaneity between investment in social capital and residential mobility decisions leads to an identification problem for empirical analysis. In this paper we exploit the post-war resettlement process in Czechoslovakia as a natural experiment to confirm the causal effect of social capital on residential mobility. After World War II over 3 million Germans (some 29% of the total population in Czech lands) were forcibly expelled leaving behind empty villages and their property. Abandoned lands were swiftly resettled with Czech inhabitants creating new communities in former German villages. Our identification strategy exploits the variation in migration behavior along the historical dividing line between formerly Czech (refereed to as old) and German (new) settlements. For the analysis we employ administrative data on changes of permanent residency in the Czech Republic during 1971–2015. Our results document the enduring effects of social capital destruction in the settlements influenced by the resettlement process. We show a consistently higher migration rates in the new communities vis-a-vis the old communities. A set of falsification tests validates the interpretation of the results.

Making sound financial decisions is an essential skill which can have an impact on life of each consumer of financial products. The aim of this paper is to examine decision-making concerning financial matters and personal finance. The selected target group was university students majoring in finance related fields.

This research will concentrate on studying the major pushing and pulling factors that underlie the decisions of Armenian students to pursue education abroad.

The contribution deals with the strategically important problems of metropolisation. In this context, it presents a theoretically based method of assessment of metropolises, the explanatory power of which was verified on the example of the Central Europe. This method is based on three components: population size (initial assumption), economic profile (ties to economic performance) and general attractiveness (the perception of development potential). The results of the evaluation of the 27 identified metropolises were generalized using a typology of their inclusion within the framework of the listed components: most metropolises were classified as type B – an established metropolis, followed by type C – an elementary metropolis, and type A – a dominant metropolis. A practically targeted conceptualization is then demonstrated on the example of the Czech Republic. The main attention was focused on the intensity of the economic links of Prague (and two further Czech centres) with other Central European metropolises. The corresponding complementary contribution is focused on verification of metropolisation axes on express/highspeed transportation modes.

With the increasing popularity and application of the nudging concept, several ethical objections against it have also emerged. In order to contribute to the debate whether nudging is objectionable or not, this paper examines nudging in the light of transparency.
A transparent nudge is when the citizen being nudged knows the intention behind it and the means adopted to pursue the nudging object. A non-transparent nudge works in a way that the citizen cannot reconstruct the object of the intervention and the means by which the behavioral change is pursued.
Wide - philosophical - consent claims how nudging can only be regarded as ethically appropriate when the nudge is transparent (Fischer & Lotz 2014; Sunstein 2015). Hausman & Welch (2010) demand for nudging transparency, even if it potentially undercuts the effectiveness of the nudge. However, empirical research on nudging often shies away from incorporating explicit transparency.
We design a survey-experiment to examine whether transparency has negative impacts on nudging effectiveness in its configuration of information disclosure nudging (Loewenstein et al. 2014b; Altmann & Traxler 2014; Wisdom et al. 2010). In partnership with the German Federal Centre for Health (BZgA), we address the very salient and relevant case of the voluntary participation into the German organ donation initiative. We do not find evidence that transparency inhibits the effectiveness of information disclosure nudges. Our finding supports the policy-relevant claim that information disclosure nudges can be transparent and yet very effective, reconciling at the same time philosophical problems. This result is in line with recent findings by Bruns et al. (2016): In a lab experiment, focusing on default nudge applied to contributions to carbon emission reduction, they do not find evidence that transparency inhibits the effectiveness of a default nudging strategy. Similarly, Loewenstein et al (2014a) testing the interaction between transparency and defaults, get to similar conclusions according the analysis of an online-study focused on health-care related choices.

The pricing behavior of vertically-integrated firms is a heavily investiga- ted topic in economic literature. While most research in this context focuses on network industries, the present paper investigates a similar set-up on the retail gasoline market. We provide the first examination of asymmetric cost- pass through on a gasoline market with a dominant upstream firm which is also active as a retailer. Furthermore, we differentiate explicitly between local markets on which the firm is present exclusively as a wholesale seller and those on which it participates at both market levels.
While upstream competition is common place on the US market, in Europe gasoline wholesale tends to be dominated by recently privatized large pro- ducers, which are also active in the retail market. The optimal behavior of such upstream monopolists facing competition downstream has been subject of rigorous academic debate. On the one hand, such a firm has an incentive to exercise its power by passing on cost changes asymmetrically and sustai- ning high prices in order to raise its competitors’ costs (Salop and Scheffman, 1983). Such firms are likely to combine this wholesale strategy with aggres- sive pricing at the retail level in order to push competitors out of the market. Conversely, the firm may choose to set low prices and transmit cost changes quickly if it seeks to foster demand downstream, even if this increase in de- mand for the product is detrimental to its own downstream business. Sibley and Weisman (1998) argue that such a firm will be willing to forfeit per-unit profitability in order to increase overall sales volume, hence resulting in in- significant anti-competitive behavior.
We investigate this process empirically using weekly data for over 900 stati- ons for two years from the Hungarian gasoline market. An error correction model is estimated to measure the speed and asymmetry of cost pass-through at the wholesale and retail level. We find that a firm with a dominant up- stream position is likely to charge high prices on the wholesale market and act competitively at the retail level. This applies both to mark-up levels and to the level of asymmetry in cost pass-through.
While upstream decisions affect all firms equally, the influence of retail pri- cing behavior is likely to wane with distance. In order to determine how the aggressive retail pricing scheme of the firm will affect its rivals, we analyze a) the local market characteristics in areas where a retail outlet of the upstream monopolist is present and b) the pricing behavior of competing stations in those markets. This allows us to determine what type of market is most likely to be affected by the presence of the vertically integrated seller, as well as what the precise effect on pricing is likely to be. The analysis of the results allows us to determine to what extent the disciplining retail effect of the monopolists’ competitive pricing offsets the negative effect of his wholesale mark-up.

Tax evasion constitutes a fiscal loss to the tax authority and a welfare loss for the society because it induces socially wasteful activities during which taxpayers spend real resources in order to hide their undisclosed income. We develop a theoretical model that explores the effect of audit selection rules on the losses from tax evasion. In the proposed experimental design, we test the main prediction of the model, that the competitive audit selection mechanism reduces both the fiscal and welfare loss of tax evasion. Furthermore, our model shows that a higher basic audit probability motivates taxpayers to increase their socially wasteful activities. Our experimental results confirm the predictions of the model. Our paper shows not only that the competitive audit selection mechanism provides an additional benefit if socially wasteful activities are possible, but also its relative advantage compared to an increase in the audit probability. 

There were over 3.000.000 (29 % of total population) of ethnic Germans in current Czech Republic prior to the Second World War living mostly in ethnicaly segregated villages of Sudetenland -- German-speaking regions often close to national borders. They were forcibly expeled after the end of the Second World War leaving behind empty villages and almost all their personal belogings including fully-equipped farms and factories. Abandoned lands were swiftly resettled by over a million colonizers from inland regions of Czechoslovakia (current Czech Republic and Slovakia) creating new communities in former German villages. Expulsion (Aussiedlung) and resettelment created a shock which allow us to identify differences in migration behavior between newly established and traditional communities. Empirical results indicate that emigration rate in former German villages is significantly higher even 70 years after Aussiedlung.

The World Tax Index (WTI) combines hard tax data available from world-respected sources and national tax laws with soft data expressing Qualified Expert Opinion (QEO). The QEO is gained from annual large-scale questionnaire survey conducted among tax specialist from all OECD countries. The methodology of creating WTI and questionnaire were rebuilt this year and the pilot was sent to the experts in the Czech Republic.

The literature suggests that there is a significant gender gap in the support of far right parties. Male voters exhibit a higher propensity to voting for them. The probability of voting for these political parties is even higher with young and pensioner males. Far right voters are overrepresented among manual workers, routine non-manual workers, the self-employed and the unemployed. The voters usually have lower level of education and are less skilled. All these findings are based on social-survey data. Are they consistent with hard economic data, however? In order to answer this question, we analyse the set of 28 EU member states from 2000 to 2014. We extend our research to voting results of far right, far left and populist parties in parliamentary elections. We focus on diverse specifications of employment rates which are offered by the Eurostat database (by gender, age, education attainment, occupation, working time, etc.). In our model, we also include other variables of the labour market, economic activity, and variables in demographics and politics. We estimate the Heckit model with the maximum likelihood estimator because of many left censored dependent observations. During the observed period, Europe was affected by three phenomena: structural changes in the labour market, the aging of population and an economic crisis. The number of economically active men between 15 and 39 years of age diminished, many of them lost their jobs during the economic crisis and they have a lower chance of going back to work in the future because of their lower skills. They may feel frustrated and therefore turn to extreme and populist parties.

People often exhibit so called optimism bias. When predicting what will happen in the future, they overestimate a likelihood of postitive events and underestimate a likelihood of negative events. This paper shows that there is an evidence of an optimism bias in the betting market. I model optimism bias as an elevation in the probability weighting function. Using data from Czech bettingmarket I estimate how the elevation di ers between league matches and matches of the Czech national team. The results show that Czech bettors are overly optimistic when predicting the outcome of Czech national team match.

This paper studies implications of the zero lower bound (ZLB) on interest rates for the size of fiscal multipliers. The analysis is carried out in extended ECB’s New Area-Wide Model that contains various fiscal instruments. The results show that the most effective tool of fiscal policy at ZLB is government consumption. If  the economy is expected to stay longer in liquidity trap, this multiplier is much higher and can exceed value of two. Behaviour of multiplier for government investment is rather tricky. Its value is amplified but only when the economy stays at ZLB for few years. Very significant amplification effect was found for consumption taxes multiplier, but its value stays below unity. Also government transfers multiplier increased a lot in relative terms, nevertheless its absolute value remains very small. Other fiscal instruments were influenced only negligibly.

This paper deals with asymmetry between house prices and consumption that is present in data of the Czech economy. We use small open economy model with housing sector and collateral constraint on loans. The model is estimated by Bayesian techniques on Czech data and then simulated with toolbox for occasionally binding constraint. The mechanism works as follows. When the price of houses decreases, the value of collateral drops down and households are forced to reduce their borrowing and consumption. When house prices increase, households’ constraint becomes slack and consumption increases only partly. The asymmetrical relationship between the house prices and the consumption obtained  from simulations thus confirms the empirical findings. The contribution of the zero lower bound on interest rate was found insignificant as the fluctuations in house prices have negligible effect on behaviour of interest rate which equilibrium level was also quite high.

In 2015, Czech Republic witnessed harsh debate about the future of lignite open-cast mining. The need of the price stability in district heating (DH) lignite power plants has been one of underlying argument in favor of mining continuation. DH delivers heating energy to roughly one third of Czech households relatively cheaply (compared to other sources). Thus the arguments such as “economic stability” of DH systems and the availability of cheap heat have been used frequently in the debate. Surprisingly enough, the actual micro-economic analysis of DH sector in Czech Republic is considerably underdeveloped. This paper aims to fill this gap. We focus at the power plants (PP) with combined output of heat and electricity of at least 100 TJ per year, where the heat production is dominant. This group consists of 36 PPs of variable characteristics (such as production capacity, ownership, consumer portfolio etc.). 9 of them have full economic data available open source. Despite the fact we find large inconsistencies in the data, we aim to calculate price and income elasticities of the PP in question and estimate the price-cost margins. There are multiple ways of approaching the elasticity estimations, but the initial look at the data indicates the results are likely highly dependent on the plant. For instance pooled estimate of SR elasticity is about -0.58, but if we allow for the fixed panel effects, we find the SR price elasticity −0.212. In the dynamic panel model distinguishing between SR and LR elasticities, we estimate the SR elasticity to be -0.086 and LR elasticity approximately -0.16. Given the peculiarity of the data, we do not primarily seek to generalize, but rather pinpoint what needs to done in further research.

Abstract: From the introduction of Brynjolfsson’s “Productivity Paradox” and Bannister’s and Remenyi’s “act of faith”, the scientists are tackling the challenge of evaluating intangible benefits of information systems. Not only companies are struggling with success of IT projects but they are usually unable to say, if the information system is proving to be beneficial. To this day, the solutions and suggestions are far from being useful or used, if the problem of evaluation of intangible benefits of information systems can be even solved. In order to try to organize the body of knowledge in this area, this talk will introduce and describe a preliminary taxonomy of information system evaluation methods and give some insights on current justification and evaluation practices that were gathered from interviews with practitioners during a case study.

Abstract: Some people, called Maximizers, do not settle for good enough choices – they want to make sure what they select is the best. To discover the best options possible, they can exert large amounts of time and effort, sometimes getting stuck in an obsessive search for more alternatives to compare. To Satisficers, good enough is simply good enough. In our experiment, subjects have the option to engage in an expansive search and just like in the real life, excessive searching in the experiment comes with opportunity costs. We look at how the Maximization Inventory score is related to the number of items uncovered and to the total payouts. Also we investigate the effectiveness of different approaches to help maximizers not to ruminate and over-think their decisions. As this is a work in progress, all comments and suggestions are warmly welcome!

This study investigate price adjustement in retail gasoline market in Czech Republic. Using weekly aggregated panel data of 1285 gas stations over years 2008-2013 error-corection model is estimated to provide the evidence for asymmetric pricing responses on positive and negative shocks from commodity stock market. Even though gas station operators defer reduce the retail price when stock market prices are falling, ultimate adjustment is more pronounced after stock price decrese than increase. Thus the consequent final effect on welfare is sporadic. What are the rationale for that behaviour and why does pricing policy differ across operators? These and other questions are subject to further research.

Abstract: The main goal of this paper is to present consumers’ confidence as an important source of cyclical economic activity. We use a simplified agent-based model with a single production sector and consumers (agents). The confidence (optimism/stableness/pessimism) spreads by interactions among consumers and according to the macro state of the economy on the lattice of consumers. The aggregate level of confidence in society reflects the consumers’ expectations about their future incomes together with their preferences between current and future consumption and determines aggregate demand for consumption spending. The aggregate supply is always formed with an attempt to satisfy aggregate demand, even at the price of growing amount of inventory goods. We found that the model is capable of generating persistent endogenous business cycles. Peaks of waves of optimism/pessimism in the society correspond to the peaks of growth rate rather than the level of economic activity. The variable marginal rate of sub- stitution between present and future consumption has a countercyclical and stabilizing influence on the growth rate of economic activity.

Keywords: ACE model; business cycle; consumer confidence.

This study covers outcomes from our field research in Maldives in 2013. We investigated what are the most acute environmental and especially climate challenges generally and how they are perceived and evaluated by local inhabitants. We focused on how livelihood activities are affected by climate change, mainly due to sea-level rise and seasonal monsoons shifts. We also researched if migration from the country could be perceived as being a coping or adaptation strategy (or a combination) and the role of migration governance. That includes investigating whether local people are willing to move outside Maldives to neighbouring countries (such as Sri Lanka and India).
We applied quantitative questionnaires conducted mostly with ordinary people (N=347), living in the capital Malé and nearby islands. Our results suggest that among other environmental challenges, sea-level rise is perceived by both groups as being one of the key factors affecting Maldivian society and livelihoods in the future. More then 50% of respondents perceive future sea-level rise to be serious and migration from islands to other countries is a definite potential option for dealing with those changes in future. But Many other reasons play important roles (such as culture, religion, economics, and social aspects) in decision-making about migrating or not.

Abstract: Criminal cases can be adjudicated via court trials or alternative criminal procedures, such as penal order and plea bargaining. We develop a model of optimal allocation of cases across these alternatives. The model predicts that the evidence standards—and thus the number of wrongful convictions and wrongful acquittals—fundamentally depend upon the cost structure of the criminal process as well as on the budget resources allocated to the criminal justice system. We call this phenomenon the marginal cost of justice. Our model offers explanations why the scope of plea bargaining in the United States has been traditionally broader than the scope of alternative procedures in Europe and why their use in Europe has recently expanded.

Abstract: We consider a general equilibrium model of a private ownership economy with consumption and production externalities. The choices of all agents (households and firms) may affect utility functions and production technologies. The equilibrium notion blends Arrow--Debreu with Nash, that is, agents (households and firms) maximize their goals by taking as given both commodity prices and choices of every other agent in the economy. We provide an example showing that under standard assumptions, such economies may have infinitely many equilibria. We present our model with firms' endowments following Geanakoplos, Magill, Quinzii and Drèze (1990). Firms' endowments consist of amounts of commodities held by the firms to generate receipts from sales of initially-held stocks of commodities and claims from debts, subsidies and taxes expressible in terms of them. We prove that almost all economies are regular in the space of endowments of households and firms.

The research explores how cultural values, policy arrangements and economic pressures influence the preference for childcare. We study the parents preferences towards the childcare arrangements of pre-school children living in middle-upper class and working class neighborhoods when different options were available.  The analysis is based on 40 semi-structured interviews with parents of first graders from two cities in the Czech Republic – Prague and Brno – collected within the project Parental Choice and Caring for Children in the Czech Republic and Slovakia supported by the Grant Agency of the Czech Republic.

This paper deals with the role of predictability of property rights protection in source countries on the bilateral stock of foreign direct investments allocated in OECD countries. The poor predictability undermines the transaction costs reducing and productivity enhancing effect of property rights. Empirical results suggest that lower predictability leads to increase of investments held abroad and to decrease the amount of resources allocated to investments.  The effect is driven by negative shocks when actual level of property rights protection is lower than expected. On the other hand there is no effect on FDI in the case positive shock where the lower predictability is compensated by positive effect of institutional innovations.

Abstract: The paper explores the effect of different contract awarding procedures on the price of the contract. We provide a theoretical model that compares prices in different procurement procedures. The model predicts that 1) prices in auctions are lower than prices in negotiations and 2) prices in open procedures are lower than prices in closed procedures if and only if the procurer selects relatively inefficient bidders. Based on data from Czech public procurement, we test whether there is a significant price difference between auctions and negotiations and between closed and open procedures. The main result is that auctions and open procedures lead to significantly lower prices compared to negotiations and closed procedures.

Abstact: In this paper, we test whether the prospect theory parameters estimated from laboratory experiments correspond to behavior in betting markets. Using Czech sports betting data, we estimate the functional forms commonly used for experimental validation of prospect theory. We find that the data are best fitted if the representative bettor is risk-loving and has a close to linear weighting function. In addition to that, we show that the traditional inverse S-shaped weighting function cannot explain the observed price data, even if bettors may differ in their risk attitudes. Therefore, the observed betting behavior represents an important deviation from the prospect theory parameterization derived in laboratory experiments.

Abstract: We analyze the effect of local competition on prices in the retail gasoline market in Czech Republic. Our analysis suggests that spatial clustering of gas stations of the same brand increases the equilibrium prices. Using a flexible measure of local density, we also find that the number of competing stations in the proximity of a station reduces its price and that the effect fades out with the distance. Furthermore, we demonstrate the importance of spatial competition in the Czech Republic using merger simulation.

Abstract: Vláda ČR se vrací k otázce prolomení limitů těžby hnědého uhlí v severních Čechách. Nechává na toto téma zpracovat dílčí studii týkající se přímo trhu s hnědým uhlím a zvažuje zadání širší/obsáhlejší studie podporující konečné rozhodnutí zda a do jaké míry limity prolomit nebo neprolomit.
Neprolomení limitů by s sebou v horizontu dvou dekád přineslo transformaci energetického sektoru, protože snížení těžby by vedlo k vyšší konkurenci mezi spotřebiteli. Hlavními spotřebiteli jsou teplárny a elektrárny, které stát chápe jako strategické. Většina elektráren je v rukách ČEZ, teplárny jsou rozprostřeny mezi řádově desítky provozovatelů.
Otázkou do diskuse je, jak regulovat trh s hnědým uhlím, pokud by nabídka skutečně nedokázala pokrýt poptávku. Tedy jak rozhodnout o tom, kdo by uhlí dostal a kdo ne.

Abstract: Aktuální úspěchy krajně pravicových a levicových stran jsou často dávány do souvislosti s ekonomickou krizí. Cílem empirické analýzy je ověřit, nakolik zhoršení výkonnosti ekonomik přispělo k nárůstu volební podpory těchto stran. Výzkum je proveden na souboru 23 zemí Evropské unie v období 1995-2012. Autoři dospěli k závěru, že v rozhodování voličů krajní pravice nehrál vývoj ekonomiky jako celku žádnou roli. Špatná výkonnost ekonomik však byla důležitou determinantou pro voliče, kteří dali svůj hlas stranám krajní levici. Citliví byli především na vývoj HDP a míry nezaměstnanosti.

Abstract: In this paper we seek an explanation of property rights protection under the rule of autocratic regimes. We hypothesise that increase in the transaction costs allows an autocrat to decrease the level of the property rights protection. We primarily focus on the effects of the transaction cost of taking collective action, which we assume is given by the state of social networks. We use regression analysis of aggregated empirical data to test the hypothesis.