Matching estimators are widely used in empirical economics for the evaluation of programs or treatments. Researchers using matching methods often apply the bootstrap to calculate the standard errors. However, no formal justification has been provided for the use of the bootstrap in this setting. In this article, we show that the standard bootstrap is, in general, not valid for matching estimators, even in the simple case with a single continuous covariate where the estimator is root-N consistent and asymptotically normally distributed with zero asymptotic bias. Valid inferential methods in this setting are the analytic asymptotic variance estimator of Abadie and Imbens (2006a) as well as certain modifications of the standard bootstrap, like the subsampling methods in Politis and Romano (1994).
This paper provides conditions for identification of functionals in nonparametric simultaneous equations models with nonadditive unobservable random terms. The conditions are derived from a characterization of observational equivalence between models. We show that, in the models considered, observational equivalence can be characterized by a restriction on the rank of a matrix. The use of the new results is exemplified by deriving previously known results about identification in parametric and nonparametric models as well as new results. A stylized method for analyzing identification, which is useful in some situations, is also presented.
Numerous psychological and economic experiments have shown that the exchange of promises greatly enhances cooperative behavior in experimental games. This paper seeks to test two theories to explain this effect. The first posits that individuals have a preference for keeping their word. The second assumes that people dislike letting down others' payoff expectations. According to the latter account, promises affect behavior only indirectly, because they lead to changes in the payoff expectations attributed to others. I conduct an experiment designed to distinguish between and test these alternative explanations. The results demonstrate that the effects of promises cannot be accounted for by changes in payoff expectations. This suggests that people have a preference for promise keeping per se.
Consider two agents who learn the value of an unknown parameter by observing a sequence of private signals. The signals are independent and identically distributed across time but not necessarily across agents. We show that when each agent's signal space is finite, the agents will commonly learn the value of the parameter, that is, that the true value of the parameter will become approximate common knowledge. The essential step in this argument is to express the expectation of one agent's signals, conditional on those of the other agent, in terms of a Markov chain. This allows us to invoke a contraction mapping principle ensuring that if one agent's signals are close to those expected under a particular value of the parameter, then that agent expects the other agent's signals to be even closer to those expected under the parameter value. In contrast, if the agents' observations come from a countably infinite signal space, then this contraction mapping property fails. We show by example that common learning can fail in this case.
Our concern is the extension of the theory of the Shapley value to problems involving externalities. Using the standard axiom systems behind the Shapley value leads to the identification of bounds on players' payoffs around an “externality-free” value. The approach determines the direction and maximum size of Pigouvian-like transfers among players, transfers based on the specific nature of externalities that are compatible with basic normative principles. Examples are provided to illustrate the approach and to draw comparisons with previous literature.
This paper studies the asymptotic behavior of Fisher's information for a Lévy process discretely sampled at an increasing frequency. As a result, we derive the optimal rates of convergence of efficient estimators of the different parameters of the process and show that the rates are often nonstandard and differ across parameters. We also show that it is possible to distinguish the continuous part of the process from its jumps part, and even different types of jumps from one another.
Previous research has argued that debt financing affects equity-holders ’ investment decisions, producing substantial inefficiency. This paper shows that the size of this inefficiency depends on the degree of investment reversibility. In a dynamic model of financing and in-vestment, the paper provides an upper bound for the inefficiency pro-duced by debt financing. The upper bound is decreasing in the degree of investment reversibility and is zero when investment is perfectly reversible.
Large Japanese banks often engaged in sham loan restructurings that kept credit flowing to otherwise insolvent borrowers (which we call zombies). We examine the implications of suppressing the normal competitive process whereby the zombies would shed workers and lose market share. The congestion created by the zombies reduces the profits for healthy firms, which discourages their entry and investment. We confirm that zombie-dominated industries exhibit more depressed job creation and destruction, and lower productivity. We present firm-level regressions showing that the increase in zombies depressed the investment and employment growth of non-zombies and widened the productivity gap between zombies and non-zombies.
A large empirical literature has documented that firm-level differences in productivity, size, ownership status, and other characteristics are crucial to understanding differences in firms’ decisions to export. The evidence strongly supports the self-selection of more productive firms into export markets, but there has been more mixed evidence on the subsequent feedback effects of exporting on the future path of firm productivity. Several recent papers have introduced a new dimension into this export-productivity relationship: firm-level investments in productivity-enhancing activities such as R&D. James A. Costantini and Marc J. Melitz (2007), Alla Lileeva and Daniel Trefler (2007), and Paula Bustos (2006) explore the linkages between investments in innovation, productivity, and the decision to export in the context of the liberalization of trade regimes. Aw, Roberts, and Tor Winston (2007) have also found a significant role for firm R&D investments in explaining Taiwanese firm export patterns, as well as interaction effects between firm R&D and export choices in explaining productivity change. In this paper we summarize some empirical results from our research project to develop an estimable structural model of the joint exportinvestment decision. In the theoretical model, firms invest in R&D and physical capital, which can affect the path of future productivity for the firm. R&D investment, through its effect on future productivity, increases the profits from exporting, and participation in the export market raises the return to R&D investments. The theoretical model yields equations for the policy functions for R&D investment, physical investment, and the exporting decision, as well as the evolution of firm-level profitability, that can be estimated with micro datasets containing R&D Investments, Exporting, and the Evolution of Firm Productivity