Research Seminars

Minimizing the semivariance of a portfolio is analytically intractableand numerically challenging due to the endogeneity of the semicovariance matrix. In this paper, we introduce a smoothed estimator fort he portfolio semivariance. The extent of smoothing is determined by a single tuning constant, which allows our method to span an entire set of optimal portfolios with limit cases represented by the minimum semivariance and the minimum variance portfolios. The methodology is implemented through an iteratively reweighted algorithm, which is computationally efficient for optimization problems with many assets. Our numerical studies confirm the theoretical convergence of the smoothed semivariance estimator to the true semivariance. The resulting minimum smoothed semivariance portfolio performs well in- and out-of-sample compared to other popular selection rules.

Increasing evidence points to the fact that the behavioral measures we use to elicit risk attitudes fail us. In recent years evidence has accumulated that our measures 1. correlate poorly with self-reported risk attitudes, real-world risk behaviors, and among themselves; 2. introduce distinct measurement errors and behavioral biases; 3. are not robust to sit-resit exercises.

Why do Risk Elicitation Tasks (RET) show so little predictive validity? Despite the large number of studies comparing risk elicitation procedures, the extent to which current RETs are able to capture self-reported or out-of-the-lab behavior is still partly unknown. Since each study can cover only a limited subset of tasks and self-reported or real-world behaviors, the map of the cross-correlations across tasks and behavior is far from being complete.

Luckily, the data to create such a map already exists. Experimental economists have been routinely eliciting risk attitudes for over three decades. In this presentation, I describe what we know so far about the psychometric validity of elicited risk attitudes, present a comprehensive, large dataset of the external validity of RETs, and describe two experimental designs (no data yet) aimed at tackling two of the main problems identified in the previous analyses -- measurement error and risk perception and modeling.

The ongoing effort, code and paper can be found at https://github.com/paolocrosetto/METARET and all data can be explored interactively at https://paolocrosetto.shinyapps.io/METARET_APP/

Entry in a homogeneous Cournot-oligopoly is excessive if there is business stealing. This prediction assumes that production costs reduce profits and welfare equally. However, this need not be the case. If there is asymmetric information, suppliers or employees can utilize their superior knowledge to extract informational rents. Rent payments reduce profits and deter entry, but affect neither the optimal number of firms nor welfare directly. Therefore, entry becomes insufficient if informational rents are large enough. In the context of a moral hazard model, we show that insufficient entry occurs if entry costs are sufficiently high. Such costs lower the number of firms and, thereby, raise informational rents.

This paper investigates the dependencies and comovements between the S&P 500 and WTI by means of time-varying conditional comoments from April 1983 to December 2021 at the daily level. The conditional comoments mark a new pattern between the two markets’ dependencies since the 2008 global financial crisis (GFC). We employ three macroeconomic sentiment measures, including VIX (representing fear), economic policy uncertainty (representing uncertainty), and expected business condition index (representing expectation), to investigate the underlying mechanism for the new emerging stock-oil co-movements, using the time-varying parameter vector autoregression (TVP-VAR) to investigate the time-varying impulse responses, and the nonlinear autoregressive distributed lag (NARDL) model to analyze the asymmetries in the short- and long-run effects of the sentiment indices for the pre- and post-GFC periods. The conditional comoments of both markets change direction since the GFC, with crude oil showing a stronger dependence on the S&P 500’s return, skewness, and tail events than its counterpart. Overall, the time-varying impulse responses show heightened short-lived responses to the three sentiment indices after the 2008 GFC, with an asymmetric response from the conditional comoments of WTI (negative) and S&P 500 (positive) to the positive shocks in the fear index during the post-GFC period. The NARDL regression results prove that the explanatory power of the three sentiment indices increase largely after the GFC, pointing to the strong short-run asymmetries, and the ever-increasing effect of VIX . Further investigations reveal that oil-specific fear index (OVX) has weaker effect on stock-oil comoments than VIX.

This project aims to document inmates' knowledge, perceptions, and preferences and examine how they differ from the general population and how they change over time. The project will also test selected theories explaining the causes of criminal behavior in a unified framework. The analysis will be based on survey, experimental, and administrative data collected from inmates in Czech prisons. Data collection includes two waves of surveys with around 500 inmates and 220 students and one wave of surveys with 1000 subjects representing the general population. Surveying inmates twice is key to measuring how their knowledge, perceptions, and preferences evolve during their incarceration.

Merged data of changes in real estate ownerships from the Cadastre Portal of the Slovak Republic and databases of taxplayers from the Financial Administration of the Slovak Republic revealed many sold properties over last 5 years, for which a capital gains tax was not paid. To improve the tax compliance, reminder letters were sent to potential evaders. In addition, reminder letters were also sent to former owners of properties that were sold in the current reporting period. On top of a baseline letter, we focused on behavioural effects of deterrence and morale and an explanatory effect of a graphical leaflet. The letters significantly increased the number of taxpayers paying the tax but there was no significant difference between the baseline letter and its behavioural modifications and the leaflet even backfired.

We estimate the effects of cash transfers on child well-being. To do so, we leverage program eligibility due to date of birth cutoffs and year-to-year variation in payment size from a universal and unconditional cash transfer, the Alaska Permanent Fund Dividend (PFD). Using linked individual-level administrative data on PFD payments and child maltreatment referrals, we find that an additional $1,000 to families reduces the likelihood that a child is referred to Children’s Services by age 3 by 2.0 percentage points, or about 10 percent, on average. Effects are driven by declines in neglect and physical abuse. Additionally, we show that larger cash transfers increase the probability that children live with their mothers and lower mortality by age 5.

The COVID-19 pandemic cut across geographical, sectorial and policy boundaries and imposed difficult health, economic and social challenges. Among many learnings, after the 2007/8 global financial crisis and the austerity period which followed it, what happened in 2020 offers an important experience to make local governments more financially resilient and ready to deal with similar shocks. This paper builds on a recent framework to investigate the impact of the first wave of the COVID-19 pandemic on local government financial vulnerability looking at both contingent and structural aspects. It addresses the need for a multi-country perspective on the effects of the pandemic and responds to calls to test existing models. Seven countries were chosen to represent different administrative contexts and traditions to understand what factors impact the local level in a time of crisis. Results demonstrate that not only contingent aspects, but also structural factors and the initial level of financial vulnerability influenced the responses to the pandemic, confirming findings about the importance of initial conditions and “path dependency” by previous studies.

There is an established literature looking at the effects of school entry age and age within cohort on general well-being, social capital, and measures of human capital formation. in primary and secondary school. Researchers have additionally turned their attention to longer term university and adult labor market outcomes. Prior results are mixed, but when statistically significant impacts are found they have typically been favorable. This study uses a nationwide sample of undergraduate college students from over 360 institutions to ascertain if relative age is related to reported mental health at graduation. Various identification strategies are incorporated into the study including Regression Discontinuity Design and Instrumental Variable (IV) methods incorporating student birth date relative to kindergarten age cutoff as well as relative age within cohort via ordered logit models. Results suggest being older within cohort to be positively related to increased to incidence of depression and homesickness in the last year at college graduation, more consistently for females.

It is well-recognized that news coverage varies significantly between countries. The differences include what events are reported at what frequencies and in what tones. It is also well established that these differences contribute to variations in the economic development of countries. In addition, substantial heterogeneity characterizes the news media at the subnational (regional) level, which is most evident in the large numbers of regional newspapers and media outlets. In contrast to the national level, this heterogeneity has received much less attention in contemporary literature. More precisely, little is known about the degree that newspaper readers in distinct locations are exposed to different information, topics, journalistic opinions, and sentiments. Similarly, how regional socio-economic characteristics shape local news and how these in turn influence people’s behavior is far from being sufficiently researched. More often than not, it is the lack of data limiting empirical investigations.

The presentation will give an overview of the contemporary literature and highlight existing research avenues. It will be based on several empirical investigations utilizing the recently established RegNeS database, which features more than 16 million German-language media headlines published between July 2019 and February 2023 obtained from more than 250 regional and national news outlets. The empirical studies give insights into the relationship between regional news and regions’ socioeconomic development from various angles including innovation activities being reflected in regional news and the latter’s impact on COVID19-related health behavior.

In this talk, I will describe a model explicating telework as a dynamic process, theorizing that teleworkers continuously adjust – their identities, boundaries, and relationships – to meet needs for competence, autonomy and relatedness in their work and nonwork roles. The model uses the lens of job crafting to posit changes teleworkers make to enhance work-nonwork balance and job performance, including time-related individual differences to account for contingencies in dynamic adjustments. I will also discuss how feedback from work and nonwork role partners and one's self-evaluation results in an iterative process of learning to telework over time. In the second part of the talk, I will present empirical evidence that offers preliminary support for the dynamic telework crafting model, based on data collected from individual teleworkers as well as teleworking teams.

The rapid development of information technology and smartphone applications has introduced new and unique transportation services. This article introduces one of these recently established systems in South Korea, called application-based taxi pooling service (ATPS). The service differs from regular ridesharing in that the participating drivers are already registered taxi drivers. This study aims to investigate users’ willingness to use ATPS from the perspective of service attributes during the morning commute time and late-night. For this, a discrete choice experiment survey was conducted over one week in 2019, targeting 1,000 Seoul citizens who used taxis at least once over the past month. As a methodology, mixed-effect logistic regression modeling is used to jointly predict users’ behavioral processes of ATPS adoption for different choice experiments constructed based on the combination of four service attributes: fare, route matching degree, detour time, and waiting time. The estimated models revealed the dynamic impacts of all four service attributes on the acceptance of ATPS, which vary depending on the time of the day. In particular, the impacts of discounted fare were almost zero during late-night, and users brought higher value to the waiting and detour times. Users’ conventional taxi use experience and personal preferences were also found to be important elements in the acceptance of ATPS. The findings of this study will provide reasonable guidelines for the deployment of ridesharing services in car-dominant cities where citizens have not yet been introduced to the concept of ATPSs.

Exploiting a novel data set of criminal trials in 19th century London, we evaluate the impact of an accused’s right to counsel on convictions. While lower-level crimes had an established history of professional representation prior to 1836, individuals accused of committing a felony did not, even though the prosecution was conducted by professional attorneys. The Prisoners’ Counsel At of 1836 remedied this and first introduced the right to counsel in common law systems. Using a difference-in-difference estimation strategy we identify the causal effect of defense counsel. We find the surprising result that the professionalization of the courtroom led to an increase in the conviction rate, which we interpret as a consequence of jurors feeling that the trial became fairer. We go further and employ a topic modeling approach to the text of the transcripts to provide suggestive evidence on how the trials changed when defense counsel was fully introduced.

During economic, health, or political hardships, politicians often leverage citizens’ discontent and scapegoat minorities to obtain political support. This paper tests whether political campaigns scapegoating migrants for the health crisis affect social, political, and economic attitudes and behaviors. We implement an online nationally-representative survey experiment in Italy to analyze the effects of the strategic use of information about immigration on socio-political and economic attitudes and behavior. We manipulate the quantity and the content of information, including facts emphasizing the potential health consequences of immigration. Results show that information provisions associating immigration with health threats do not generate sizeable add-on effects compared to that based on immigration only. If anything, it increases disappointment towards Italians, reduces social and institutional trust, and undermines partisanship among extreme-right supporters. Overall, political campaigns based on these narratives appear relatively ineffective or, when successful, counterproductive from social and political viewpoints.

This paper studies the labor market effects of out- and in-migration in the context of cross-border commuting. It investigates an EU policy reform that granted Czech citizens full access to the German labor market, resulting in a Czech commuter outflow across the border to Germany. Exploiting the fact that the reform specifically impacted the Czech and German border regions, I use a matched difference-in-differences design to estimate its effects on local labor markets in both countries. Using a novel dataset on Czech regions, I show that municipalities in the Czech border region experienced a decrease in unemployment rates due to the worker outflow, while vacancies increased. For German border municipalities, I find evidence for slower employment growth (long-term) and slower wage growth (short-term), but no displacement effects for incumbent native workers.

A rich literature has long studied the asymmetric effects of monetary policy over the business cycle, generally presenting mixed results. Most of the empirical work, however, focuses on the responses of output and prices. Given the key role it plays in the transmission of monetary policy and the relatively scarce studies on the subject, this paper centers the analysis on the dynamics of the markup. Recent empirical findings suggest that, even when the New Keynesian models are not able to reproduce such dynamic, the markup decreases in response to a monetary policy tightening shock. This paper, by putting forward a local projections approach and analyzing the response of the markup during the period 1990m2-2016m12, argues that the dynamic of the markup may depend on whether the monetary policy tightening shock takes place during a period of expansion or recession. In this latter case, for instance, the New Keynesian model seems to do a good job, suggesting that only tightening mistakes may be successfully addressed within the basic New Keynesian framework.

This paper seeks to quantitatively assess the key role of the three components of heterogeneity in open economies, namely the consumption gap between hand-to-mouth and Ramsey households, the consumption dispersion between Ramsey households and the existence of a fixed share of the two groups of households (HANK model) in the conduct of monetary policy in Europe and the US, as the two economies trade with each other. Using Bayesian estimation techniques, we estimate three models, a model with representative agents (RANK model), a model with heterogeneous agents so that the share of the two groups of households remains constant over time (TANK model) and the HANK model. We conclude that the HANK model plays a key role in the conduct of monetary policy in Europe and the United States and in the mitigation of cycles and fluctuations. The American economy is more sensitive to heterogeneity than the European one, because the differences in parameters between the models are greater in the USA than in Europe. Coordination between the two central banks on price stability always reveals that the HANK model attenuates fluctuations more than the other two models.

We explore whether marginal Q and investment fluctuate due to revisions in expected marginal profits or discount rates, and by how much of each. We infer marginal Q from the marginal cost of investment, derive a present-value relation, and conduct a VAR-based variance decomposition for marginal Q. We find that discount rates (expected investment returns) drive the bulk of fluctuations in average Q and investment in the time series, but play no role in driving the cross-section of portfolios' average Q and investment. That is, marginal profits are the sole determinant of the cross-section of marginal Q and investment.

This paper studies the response of firms’ research and development (R&D) expenditure to monetary policy shocks in the US economy. Empirical results suggest that a 20 basis point increase in the interest rate decreases the aggregate R&D expenditure by 0.6 percent. Using Compustat firm-level data, I confirm that a monetary contraction leads to a persistent decline in US firms’ R&D expenditure. The effect on R&D expenditure is stronger for interest rate hikes and when firms face higher uncertainty. This is because economic uncertainty decreases firms’ leverage ratio and makes them more financially constrained, rendering R&D investment more vulnerable to contractionary policy shocks. I build a medium-scale DSGE model with endogenous output growth and financial frictions to interpret the empirical findings. The theoretical model highlights the importance of the credit channel for altering the effects of monetary policy on firms’ investment in R&D in the presence of economic uncertainty

This paper shows that the impact of credit supply on economic activity is conditioned by banks’ equity distribution. Using a myriad of publicly available data on bank’s balance sheet, and mortgage and business lending from the United States, we offer novel empirical evidence on how changes in the level of bank equity affects the impact of credit supply on economic activity. Our results show that areas exposed to lenders with high level of bank equity experience high levels of economic growth and employment. We also construct a quantitative model that rationalises this empirical evidence by showing how aggregate lending is influenced by banks’ equity distribution. Our model shows that the higher the bank equity exposure of an area is, the more credit supply is provided to the area. While the model shows that banks’ equity distribution matters for understanding the impact of mortgage credit on economic performance, it does not have the same explanatory power to explain the impact of business credit on economic growth, which may be more influenced by risk-return trade-off decisions.

Economic logic posits that a bank’s stock price should contain the relevant information about its financial health. For this reason, bank depositors may anchor their withdrawal decisions on their bank’s stock price in situations of financial stress. In doing so, the mere inference of “bad news” from the bank’s stock price can trigger a self-fulling bank-run. However, if the bank’s shareholders anticipate that depositors’ withdrawal behaviour may depend on the bank’s stock price, would “bad news” still be reflected in stock prices? Recognising this, would depositors still rely on stock prices to draw inferences about the bank’s health?

What is the compliance effect of experiencing a tax audit? Empirical studies typically report a positive effect, while laboratory experiments frequently report a negative effect. We show experimentally that whether a tax audit increases or decreases subsequent compliance hinges on the balance of learning opportunities, misperception of audit risk, and the confounding effect of censoring. After an audit, taxpayers lower their perceived risk of audit – consistent with a bomb-crater effect – when audit selection is exogenous. However, for an endogenous audit rule under which taxpayers can learn to reduce their audit risk by reporting higher income, learning effects outweigh probability misperception, resulting in an increase in post-audit tax compliance. Finally, we show that accounting for censoring effects can eliminate on its own the negative post-audit compliance effect frequently observed in laboratory experiments.

Support for welfare system is conventionally measured by two different concepts. One focuses on people’s approval of redistribution principles and aims to capture citizens’ acceptance of a welfare state arrangement or some of its constitutive parts (i.e., specific welfare programs). Second option is more general and captures to what degree citizens trust the institutions and their main representatives. Both concepts – support for redistribution and political trust – inspired two broad streams of literature and thus it is surprising that the research has brought them together only to conclude that they have little in common (Svallfors 2002). This paper argues otherwise and proposes a theoretical argument that material circumstances constitute the common denominator impacting two distinctive supports for welfare system in a mutually exclusive way. As people are becoming wealthier, they are decreasingly willing to share their “well-deserved” resources, while their political trust increases possibly because they believe that the current political representation contributed to the improvement in their lives. On the other hand, as people are getting poorer, they tend to blame, and hence distrust the government, while their support for redistribution rises because it improves their own situation. This theoretical proposition is supported via several empirical tests. First, the very existence of these two opposite tendencies across various political systems is demonstrated via the cross-sectional European Social Survey data. Second, the internal validity of the role of material circumstances in people’s political trust and redistribution preferences is supported via analyses utilizing three wave panel surveys conducted in Norway and Germany. These findings advance our understanding of the role of material circumstances in peoples support for welfare systems—most importantly, they imply that welfare systems can enjoy only one kind of support within the same individuals.

This paper assesses whether facilitating the digital access to healthcare services impacts healthcare utilization. We exploit the introduction of a user-friendly web portal allowing women aged 25-65 to manage online their appointments in the public cervical cancer screening program carried out by a North-Eastern Italian Local Health Unit (LHU) in November 2019. We report quasi-experimental evidence on how this intervention affected both the program participation and the ability of the LHU to collect information on women’s screening behaviour outside the program.

This paper studies experimentally the use of voluntary consumption quotas as a strategy to deal with energy shortages. We run an online experiment where subjects play a two-round Nash demand game that captures key features of electricity consumption decisions. Each player is assigned to a group of 10 players. In round 1 the total energy pool is 100 while in round 2 there is a 50% probability that the pool is halved. Players can choose to play the game or accept a quota policy that will guarantee them a given payoff per round. We test 3 different policies. The first guarantees a fixed payment of 5 while the others a fixed share of either 10% or 6% of the pool. Our results show that in the baseline treatment players usually over-extract leading to energy shortages. Moreover, in case of power cuts, players adjust their demand downwards but less than the decrease in the pool. When quota policies are offered, the majority of players accept them. However, the fixed payment has a significantly lower acceptance rate while the 10% is the most accepted. Finally, we simulate 20000 groups per treatment to check the effectiveness of quotas in reducing over-extractions. While in the baseline the outage rate is close to 100% in each round, every quota is effective in reducing the shortages. In this case, the 6% policy is the most effective in every round.

Tertiary education is largely accepted to be one of the most important determinants of lifetime earnings and, consequently, of social mobility. Despite low tuition fees and limited entry barriers, Italy and Germany show a lower level of attainment at the tertiary education level with respect to the EU average and the 2030 targets. We propose an agent-based model where agents decide whether attending university or leaving education and entering the labour market right after school. Individual preference to enrol at university will depend on (i) economic motivations, represented by expectations on future income; (ii) influence from peers; (iii) individual effort to obtain a university degree. Agents may benefit from a scholarship to pursue their university study career. The aim is to analyse the (economic) effect of the scholarship in the two countries and investigate potential differences given by their respective socioeconomic context.

In this paper, we use contribution decisions in a multilevel public goods game to investigate attitudes toward national public budgets and the European public budget in six countries members of the EU: Italy, Germany, France, Netherlands, Poland, and Portugal. The experimental design allows us to test whether and to what extent there are differences in the propensity to contribute to both national and European public goods in the six countries and whether there are differences in the degree to which each country group changes decisions when relative efficiency between the two public goods changes. Two hundred residents from each country were recruited through Prolific, and an overall sample of 1200 subjects participated in the online experiment. Overall we find evidence of the absence of marginal crowding-in, a presence of substitution effect, and a leveling-up effect. A few interesting differences emerge from the cross-countries analysis. At the same time, the control strategy gives insights into individual characteristics (e.g., feeling of belonging to a country vs. feeling of being a European citizen) associated with the choices. Attitudes toward the European budget seem to be grounded on beliefs that precede the most recent events, i.e., the COVID-19 pandemic and the war in Ukraine.

We estimate the impact of lockdown during the first wave of the COVID-19 pandemic on abortion-seeking behavior in Spain. We exploit the unexpected announcement and immediate implementation of a strict, nationwide lockdown which started in mid-March 2020 and lasted for 8 weeks. We explore two channels through which lockdown could have affected the need for and access to abortion services in Spain: limited social interactions and a potentially lower accessibility of health care services. We find evidence that due to a decrease in social interactions, the number of unwanted pregnancies conceived during lockdown fell by 45% among affected women. We do not find any effect on the supply side: neither travel restrictions nor overcrowded hospitals seem to have altered the accessibility of abortion services in Spain. In future work, we plan to explore also the third channel through which lockdown could have affected abortion-seeking behavior – the demand for abortion services.

This paper investigates how non-cognitive skills, e.g., memory, empathy, attention, imagination, and social skills – measured by personality characteristics – relate to the relative labour market performance of immigrants. Using the German Socio-Economic Panel (SOEP) and the Five-Factor Model of personality as a proxy for the non-cognitive skills, we show that these skills matter for the labour market integration of immigrants in the host country. We use two comparison benchmarks. Compared to an average native, immigrants’ non-cognitive skills, e.g., extroversion or emotional stability, can lead to 5–15 percentage points lower life-time employment probability disadvantage implying faster and better overall integration on average. Comparing immigrants and natives with the same type and level of non-cognitive skills suggests that returns of extroversion and openness to experience are higher among immigrants, leading to 3–5 percentage points lower lifetime employment probability disadvantage. These results are robust with respect to self-selection, non-random returns to the home country, stability of personality, and estimators. Our detailed analysis suggests that non-cognitive skills (especially extroversion) are substitutes for cognitive skills (e.g., formal education and training) among low educated immigrants, while there is no significant relative return of non-cognitive skills among highly educated immigrants.