On the Limitations of Monetary Policy

Speaker

Udara Peiris

Job Market Paper

University of Warwick

Venue

Room 105, Level 1, Colin Clark Building

Abstract

This paper argues that in a homogeneous monetary Real Business Cycle economy where a complete set of nominal contingent claims exist, the requirement to collateralize loans, alone, does not affect the equilibrium allocation when monetary policy is chosen optimally: the Pareto optimal allocation can be supported. Rather, it is the presence of additional inefficiencies such as market incompleteness or heterogeneity of agents that limits the ability of optimal monetary policy, and more precisely, inflation, to support the first best allocation. In our model policy is non-Ricardian or equivalently outside money exists, and the Central Bank trades only in short-term nominally risk-free bonds: as a consequence monetary policy that sets rates of interest and accommodates money demand effectively determines the allocation of prices at equilibrium. A Friedman rule (r=0), which would be optimal in the absence of collateral constraints, here it is not: at the resulting prices collateral constraints bind. A path of prices that avoids binding collateral constraints necessarily involves a non-zero interest rate. The path of prices that supports the Pareto optimal allocation occurs when the collateral constraint binds: a positive inflation tax on money balances is efficient. For interest rates that permit the collateral constraint to bind, a policy of stable inflation (alternatively, money growth) implies that the collateral constraint binds after a sequence of positive (respectively negative) productivity shocks followed by a negative (respectively positive) productivity shock.

About the Speaker

Udara Peiris is an Australian who obtained his PhD from the University of Oxford as a Clarendon Scholar in 2010. He works on issues relating to macroeconomics and financial frictions, particularly in the areas of international finance, monetary policy and financial stability analysis, and has publications in 'Annals of Finance' and 'Economic Theory'. Udara is currently a Teaching Fellow in Macroeconomics at the University of Warwick.

Restricted Coasean bargaining

Speaker

Ian MacKenzie

Personal Website

Job Market Paper

ETH Zurich

Venue

Room 105, Level 1, Colin Clark Building

Abstract

We investigate the efficiency of Coasean bargaining when restrictions are placed on the set of feasible bargaining outcomes. When property rights are costly to (defend) appropriate, we find bargaining restrictions may be Pareto superior to unconstrained voluntary exchange. Under cost uncertainty over the externality, we show an efficient configuration of restrictions must balance the potential reduction in appropriation costs with the possibility of allocatively inefficient bargaining restrictions. For cases where the restrictions are contested, we show conditions for the continuing existence of welfare improvements.

About the Speaker

Ian MacKenzie is a Post-Doctoral Research Fellow at the Centre for Economic Research, ETH Zurich, Switzerland. His research interests include environmental economics, microeconomics (contest theory), public economics, law and economics, and political economy. Recent papers have been published in the Journal of Environmental Economics and Management and Oxford Economic Papers.

Estimating the value of beach recreation in the Great Barrier Reef Marine Park, Australia: A pooled revealed preference and contingent behaviour model

Speaker

Prabha Prayaga

UQ Website

Job Market Paper

The University of Queensland

Venue

Room 105, Level 1, Colin Clark Building

Abstract

Given the focus on protecting natural assets in the Great Barrier Reef Marine Park in Australia, it is important for managers and policy makers to understand the value of recreational beach use in the area, and how changes in management may affect those recreational values. Travel cost methods were used to estimate the value of recreational beach use in the Capricorn Coast region of the GBRMP using data from survey data from three main user groups – locals Rockhampton residents and tourists. The study uses contingent behaviour models to estimate the change in the value of recreational beach uses as water quality and other conditions along the coast change. Results indicate that there are high values associated with recreational beach use along the Capricorn Coast, and that the demand for recreational beach use is inelastic and that values were insensitive to changes in water quality and other conditions.

About the Speaker

Prabha’s PhD on ‘Estimating changes in the values for recreation in the Capricorn Coast region of the Great Barrier Reef due to changes in water quality’ focused on issues relating to non-market valuation of resources particularly those used for recreation. She has publications in ‘Tourism Economics’, ‘Australian Journal of Agricultural and Resource Economics’ and ‘Marine Policy’. Prabha is currently a Postdoctoral research Fellow at the University of Queensland where she is extending her knowledge in survey design and survey data analysis to areas of development economics.

Men's Rush to Marriage: Implications of Child Support Enforcement for Marriage, Fertility and Long-Term Inequality

Speaker

Satoshi Tanaka

Personal Website

Job Market Paper

University of Minnesota

Venue

Room 105, Level 1, Colin Clark Building

Abstract

The child support enforcement (CSE) policies, aimed at protecting out-of-wedlock children from financial disadvantages, brought unexpected changes in individuals’ marriage and fertility behaviors during the 1980s and the 1990s. Our estimates from the state-year panel data show that in states with strict CSE there has been a significant decrease in non-marital births and a significant increase in marriages and marital births. After allowing individuals to respond to these policies, what are the effects of CSE on children’s welfare? To address this issue, we build a heterogeneous-agent model that features marriage and child-investment decisions. Exploiting the state-level variation in enforcement, we estimate it with the National Vital Statistics Report. In our model, the inefficiency of quality investment in children within non-marital relationships is crucial to increase men’s willingness to marry. While CSE forces fathers to shift from the quantity to the quality of children, it does not increase the child’s quality because the father cannot ensure that his support will be well spent. Our model predicts that a large increase in investment in children comes through a secondary effect of CSE: the shift from non-marital births to marital births increases child quality through its income effect.

About the Speaker

Satoshi Tanaka is a Ph.D. candidate at the University of Minnesota. His research interests include macroeconomics, family economics, labor economics, occupational search theory, and quantitative method. In his recent research, he is working on issues relating to 1) family policy and its implication for macroeconomics, 2) worker's occupational swiching behavior and wage inequality, and 3) the effects of demographic change on marriage patterns. He is expected to complete his Ph.D. in July 2012.

Towards an Analytical Solution for Agent Based Models: an Application to a Credit Network Economy

Speaker

Corrado di Guilmi

Personal Website

Job Market Paper

University of Technology Sydney

Venue

Room 105, Level 1, Colin Clark Building

Abstract

In this paper we present an analytically solvable model of the credit market with heterogeneous and interacting firms and banks. The economy is modelled as a network, a theoretical structure which is particularly suitable to represent the interactions among different agents. In this credit network firms interact directly with banks and, indirectly, among themselves. The main novelty is the use of the master equation to perform the aggregation over a population of heterogeneous firms and to describe the endogenous evolution of the network. The asymptotic solution of the master equation provides a system of coupled equations which governs the dynamics of growth and fluctuations of the aggregate output and the network degree.

About the Speaker

Corrado Di Guilmi is Post Doctoral Research Fellow in the Economics Discipline Group at the University of Technology, Sydney. He earned his doctoral degree at the Università Politecnica delle Marche (Italy). Corrado has published several papers in international refereed journals and one book. His main research interests are financial instability and business cycle; heterogeneous agents, aggregation and simulation methods; market structure and firm size distribution; network theory and complex systems.

Informative Advertising, Consumer Search and Transparency Policy

Speaker

Chengsi Wang

Personal Website

Job Market Paper

University of New South Wales

Venue

Room 105, Level 1, Colin Clark Building

Abstract

Information about a new or non-frequently purchased product is often produced by both sides of the market. We construct a monopoly pricing model consisting of both seller's information disclosure and consumer's information acquisition. The presence of consumer search, which lowers the probability of making sales, creates incentive for the monopolist to deter search. In contrast with most previous literature, we show that, partial information disclosure arises in equilibrium when the search cost is low. As the search cost increases to medium level, the monopolist hides information but lowers the price to prevent consumers from searching. When the search cost is very high, the monopolist charges high price and hides information. The equilibrium price is thus non-monotonic in search cost. Information disclosure and consumer search coexist only when the search cost is low, and thus complement each other. We show that transparency policies on advertising cannot improve social welfare. Nevertheless, they benefit consumers in a wide range of values of the search costs by improving matching quality and reducing the expense of searching. But for some medium levels of search costs, transparency policies hurt consumers due to the induced high price in equilibrium.

About the Speaker

Chengsi is a final year PhD candidate at the University of New South Wales. His research interests include industrial organization and labor search theory, with particular focus on the market interaction between information disclosure and information acquisition. Recent papers have been published in Macroeconomic Dynamics and Contemporary Economic Policy.

Identification of Stigma Behavior through Social Networks: Blood Plasma Donation, Peer Effects and Status Seeking

Speaker

Xi Chen

Personal Website

Job Market Paper

Cornell University

Venue

Room 105, Level 1, Colin Clark Building

Abstract

Despite the resultant disutility, some people, in particular the poor, are engaged in behaviour carrying social stigma. Empirical economic studies on stigma behavior are rare, largely due to the formidable challenges of collecting data on stigmatized goods and services. In this paper, I examine blood plasma sales in China, widely regarded as a stigmatized behavior, using two primary datasets. The first is a three-wave census-type household survey from 18 villages which enables us to examine the evolving patterns, and determinants of donations. The second is data on detailed gift exchange records of all households in three out of the 18 villages which allows me to define reference groups, measure the intensity of social interactions and identify peer effects using a novel spatial instrument strategy. I find that both peer effects and concern over socioeconomic status influence plasma donation decisions. The intensity of social interactions matters in identification. Peer effects are directional and work through preference interactions that reduce stigma. The results also indicate that families with unmarried sons are more likely to donate plasma in order to offset costs of successfully getting married in a tight marriage market, such as a bigger house, a higher bride price and a more lavish wedding banquet.

About the Speaker

Xi Chen is a Ph.D. candidate in applied economics at Cornell University. His main areas of interest are Development Economics, Health Economics, Social Interactions and Networks, Applied Econometrics and Quantitative Methods. His dissertation combines two unique datasets he collected in the field over a long time period to explore how social networks in impoverished contexts have been evolving, shaping stigmatized behavior, driving gift spending escalation, and affecting early child development through in utero exposure to frequent ceremonies.

Educational Tracking, Residential Sorting, and Intergenerational Economic Mobility: Evidence from South Korea

Speaker

Yong Suk Lee

Personal Website

Job Market Paper

Brown University

Venue

Room 105, Level 1, Colin Clark Building

Abstract

How the shift does from an exam to a district based high school assignment rule impact achievement of students of different ability and socio-economic background? A stylized model predicts that under district assignment, household income relative to one’s ability becomes a stronger predictor of achievement, and higher income households sort towards and increase housing prices in the better school districts. I test predictions utilizing a unique policy change from South Korea in the 1970s. I find that the impact of father’s education, relative to one’s middle school grade, on college entrance exam score increases twofold under district assignment. The regime shift has no impact on average achievement. The change in housing land price is 13 percentage points higher in the better school district when the regime shifts. In sum, district based assignment, relative to exam based tracking, segments schools by income, lowers achievement of high ability students from poor households, and does not increase average achievement.

About the Speaker

Yong Suk Lee is a Ph.D. candidate in the Department of Economics at Brown University. Prior to his doctoral studies, he received a Master of Public Policy from Duke University. His research intersects the fields of urban, development, and public economics. He has examined secondary school allocation systems in South Korea, NGO organization in Indonesia, and Medicaid subsidies to nursing homes in the US. In an ongoing project he focuses on business start-ups in the US.

A Unified Production and Matching Function: Implications for Factor Shares

Speaker

Sephorah Mangin

Personal Website

Job Market Paper

University of Chicago

Venue

Room 105, Level 1, Colin Clark Building

Abstract

This paper develops microfoundations for a unified aggregate production function. Labor market frictions are naturally built into the aggregate production function because matching and production are two aspects of a single process. Entrepreneurs with heterogeneous productivity levels hire capital and compete for workers. If no entrepreneurs approach a given worker he is unemployed, otherwise the entrepreneur with the highest productivity hires the worker. The model provides new insights into the behavior of factor shares. If the entrepreneurs’ productivity distribution is Pareto, the aggregate production function is Cobb-Douglas only in the limit as frictional unemployment disappears. In this limiting case, factors are paid their marginal product and factor shares are con-stant. Outside this limit, factor shares are not generally constant, enabling us to examine their behavior. A key prediction of the model is that labor’s share is counter-cyclical provided that workers’ outside option is sufficiently high.

About the Speaker

Sephorah Mangin is currently a Post-Doctoral Researcher at the Becker-Friedman Institute at the University of Chicago. She recently completed her PhD, "Essays on the Microfoundations of Macroeconomics," at the University of Melbourne. Her research interests include search theory, macroeconomic theory and growth. She has been a visiting scholar at NYU Stern School of Business and has published in the Canadian Journal of Economics.

Demographic scales for ex-ante risk equalisation in the Australian private health insurance market

Speaker

Francesco Paolucci

Personal Website

Job Market Paper

Australian National University

Venue

Room 105, Level 1, Colin Clark Building

Abstract

In April 2007, as part of the Private Health Insurance Act, a ‘Risk Equalisation’ scheme was introduced in the Australian private health insurance (PHI) market. The ‘Risk Equalisation’ scheme replaces the ‘Reinsurance’ arrangements, in place since 1956, with the objective of protecting funds with riskier-than-average populations. Although several changes were made to the reinsurance scheme, the new ‘Risk Equalisation’ scheme maintained the feature of a defacto ex-post (retrospective) claims-equalisation (CE) rather than an ex-ante (prospective) risk-equalisation (RE) scheme, which is common in most countries (e.g. Belgium, Israel, The Netherlands). In competitive markets for PHI, the main problems with ex-post CE are the lack of incentives for efficiency and the presence of incentives for selection. A similar level of equalisation transfers across competing health insurers can be achieved by means of a system of ex-ante prospective risk-adjusted subsidies (i.e. RE) with higher incentives for efficiency and lower incentives for selection compared to ex-post CE. This paper examines the prospect of demographic scales for ex-ante (prospective) RE and its implications on the actual financial transfers (i.e. risk-adjusted subsidies flows) across funds. The findings of this paper serve as an information-basis for future policies, aiming to improve efficiency and prevent selection in the Australian PHI market.

About the Speaker

Dr Francesco Paolucci is an economist and Fellow at the Australian Centre for Economic Research on Health (ACERH) at The Australian National University (ANU). Prior to taking up his current post in 2007, he held academic appointments as (visiting) researcher and lecturer at the Department of Economics at the University of Bologna, at the Institute of Health Economics and Management at the University of Oslo, and at iBMG at the Erasmus University of Rotterdam where he wrote his PhD thesis entitled ‘The design of basic and supplementary health care financing schemes: implications for efficiency and affordability’. In the past 10 years he has been engaged in health economics in various countries (e.g. Australia, Italy, the Netherlands, Spain etc.) through research, fieldwork and working experience for both think-tanks and consultancy firms (e.g. Deloitte). Since 2005, he has been a member of the Scientific committee of the International Health Economics Association (iHEA). Over the last decade Dr. Paolucci has published extensively on issues of health economics, and health policy and reform nationally and internationally. This has included, since joining the ANU in 2007, one single authored book and two edited special issues in peer reviewed journals as well as over 20 academic peer-reviewed articles, book chapters and book reviews in a wide array of academic journals and presses and in different languages.

Information, Commitment, and Separation in Illiquid Housing Markets

Speaker

Derek Stacey

Personal Website

Job Market Paper

Queen’s University

Venue

Room 105, Level 1, Colin Clark Building

Abstract

I propose a model of the housing market using a search framework with asymmetric information in which sellers are unable to commit to asking prices announced ex ante. Relaxing the commitment assumption prevents sellers from using price posting as a signalling device to direct buyers’ search. Adverse selection and inefficient entry on the demand side then contribute to housing market illiquidity. Real estate agents that can improve the expected quality of a match can segment the market and alleviate information frictions. Even if one endorses the view that real estate agents provide no technological advantage in the matching process, incentive compatible listing contracts are implementable as long as housing is not already sufficiently liquid. The theoretical implications are qualitatively consistent with the observed trends in real estate brokerage: platform differentiation, endogenous sorting, and listing contract features that reinforce incentive compatibility.

About the Speaker

Derek Stacey is a fifth year Ph.D. student in the Department of Economics at Queen's University. His research covers a broad range of topics related to macroeconomics and applied theory, focusing primarily on markets with search and information frictions. In his job market paper, he develops a search-theoretic framework to study housing market illiquidity. His research profile includes two additional projects that combine theoretical and empirical methodologies. One studies land market activity in settings where there is uncertainty and private information about the security of land tenure. The other analyzes the cross-border transferability of occupational human capital.

Where Have the Middle-Wage Workers Gone? A Study of Polarization Using Panel Data

Speaker

Guido Matias Cortes

Personal Website

Job Market Paper

University of British Columbia

Venue

Room 105, Level 1, Colin Clark Building

Abstract

Using a general equilibrium model with endogenous sorting of workers into occupations based on comparative advantage, this paper derives the effects of routine-biased technical change on occupational transition patterns and wage changes of individual workers. These predictions are then tested using data from the Panel Study of Income Dynamics (PSID) from 1976 to 2007. Consistent with the predictions of the model, occupational mobility patterns of routine workers show strong evidence of selection on ability. Workers of relatively high (low) ability are more likely to switch to non-routine cognitive (non-routine manual) occupations. Also consistent with the predictions of the model, there has been a significant increase in the relative wage premium in non-routine occupations. Workers staying in routine jobs therefore perform significantly worse in terms of wage growth than workers staying in any other type of occupation. Switchers from routine to non-routine

manual jobs have significantly lower wage growth than stayers over horizons of up to two years, while those who switch to non-routine cognitive jobs have significantly higher wage growth than stayers over a variety of time horizons.

About the Speaker

Matias Cortes has a Bachelor's degree from the University of Costa Rica, and is currently completing his Ph.D. in Economics at the University of British Columbia in Vancouver, Canada. His research interests are in the field of labour economics, with a focus on occupational mobility and human capital transferability. His job market paper studies the impacts of technological change on workers' occupational choices and wages. Other work in progress studies the extent to which workers' human capital is task-specific, by analyzing whether the cost of switching between particular occupations depends on the degree of overlap in their task content. Matias has worked as a teaching assistant for a variety of courses in macroeconomics, from the introductory undergraduate level to the Ph.D. level. He has also served as the instructor for UBC's advanced undergraduate course in international macroeconomics.

Firm Entry and Exit with Financial Frictions

Speaker

Patrick MacNamara

Personal Website

Job Market Paper

University of Rochester

Venue

Room 105, Level 1, Colin Clark Building

Abstract

In this paper, I consider a model of firm dynamics to study the quantitative importance of financial frictions for the entry and exit of firms over the business cycle. Firms face a working capital constraint in that they must pay wages and choose labor in advance. The firm finances wages with a defaultable one-period non-contingent bond. Financial frictions then introduce an external finance premium into the firm's cost of borrowing, which constrains the firm's demand for labor and influences the firm's entry and exit decisions through its effect on future profits. From the data, I then measure a financial shock from corporate bond spreads and feed it back into the model. I find that, historically, financial shocks account for 43% of cyclical movements output in the United States, 37% for hours, 21% for exit rates and 7% for entry rates. In this model, aggregate fluctuations in output and hours are driven by the largest firms who are less dependent on external finance, while fluctuations in entry and exit rates are driven by firms who are smaller and more dependent on external finance. Thus, given the distribution of debt financing needs observed in the data, financial frictions can account for fluctuations not only in aggregate output and hours but exit rates as well.

About the Speaker

Patrick Macnamara is a Ph.D. candidate in the Department of Economics at the University of Rochester.  His research interests are primarily in macroeconomics and international economics, with a special focus on business cycles.  In his job market paper, he studies the ability of financial shocks to account for fluctuations in the entry and exit of firms over the business cycle.

Reputation and Securitization

Speaker

Keiichi Kawai

Personal Website

Job Market Paper

Northwestern University

Venue

Room 105, Level 1, Colin Clark Building

Abstract

We analyze a dynamic market with a seller who can make a one-time investment that affects the returns of tradable assets. The potential buyers of the assets cannot observe the seller's investment prior to trade, nor verify it in anyway after trade. The market faces two types of inefficiency: the ex-ante inefficiency, i.e., the seller's moral hazard problem; and the ex-post inefficiency, i.e., inefficient ex-post allocations due to the adverse selection problem. We analyze how the observability of information by future buyers through which the seller builds a reputation affects the two types of inefficiency, and the interplay between them. Our conclusions are as follows: If the cost of investment is small, then the observability of such information mitigates both types of inefficiency. If the cost of investment is not small, however, then it may not have any effect on them. Moreover, even when the observability of such information improves the ex-post efficiency, it does so only at an offsetting cost in terms of the ex-ante efficiency. A simple regulation based on prices observable in the markets can enhance the role of such information and achieve the social welfare which is arbitrarily close to the first-best.

About the Speaker

Keiichi Kawai holds a BA in Economics and a MA in Economics from Kyoto University. He also holds a MA in economics from Northwestern University. His Ph.D. dissertation is titled Endogenous Adverse Selection Problem, and is expected to be awarded in 2012.

His main area of interest is in Economic Theory. His work has appeared in Games and Economic Behaviors, Japanese Economic Review, and Economics Letters.

Speculative Bubbles and Real Investment

Speaker

Sergey Zhuk

Personal Website

Job Market Paper

Princeton University

Venue

Terrace Room, Level 6, Sir Llew Edwards Building (14)

Abstract

In the paper I study heterogeneous beliefs speculative bubbles in a setup in which investment is endogenous and affects information flow. My main results are on welfare implications of bubbles. During the periods of major technological innovations, which involve a lot of uncertainty about productivity of the new technology, it is socially optimal to have a bubble in asset prices, because it can mitigate learning externalities. A speculative bubble that arises, while also high in the presence of high uncertainty, is not perfectly aligned with the optimal bubble level and typically is too small at the beginning of a particular bubble episode and too large close to the end. To get tractable results, I develop a new approach for modeling heterogeneous beliefs bubbles. I consider a model in which disagreements are small and short-lived and then a limiting case in which the size and length of these disagreements converges to zero. In the limit investors’ beliefs are almost rational, but the bubble still has a positive value.

About the Speaker

Sergey Zhuk is a PhD candidate in the department of Economics at Princeton University. His research interests lie in the field of Financial Economics and include such topics as bubbles, learning models in finance, liquidity and financial stability. Before coming to Princeton he received an MA in Economics from New Economic School in Moscow, Russia and an MS in Applied Mathematics and Physics from Moscow Institute of Physics and Technology.

Behavioral Effects of Electricity Consumption

Speaker

Will Gans

Personal Website

Job Market Paper

University of Maryland

Venue

Terrace Room, Level 6, Sir Llew Edwards Building (14)

Abstract

Using a unique set of data and exploiting a large-scale natural experiment, we estimate the effect of real-time usage information on residential electricity consumption in Northern Ireland. Starting in April 2002, the utility replaced prepayment meters with “smart” meters that allow the consumer to track usage in real-time. We rely on this event, account for the endogeneity of price and payment plan with consumption through a plan selection correction term, and find that the provision of information is associated with a decline in electricity consumption of up to 20%. We find that the reduction is robust to different specifications, selection-bias correction methods and subsamples of the original data. At £17-20 per metric ton of CO2e (2009£) (based on our preferred estimate of the effect of smart meter), the smart meter program delivers cost-effective reductions in carbon dioxide emissions.

About the Speaker

Will Gans is a PhD student from the University of Maryland, College Park. His research focuses on energy consumption behavior. He will be giving a talk entitlted: the residential (in)efficiecy trap and U.S. households.

Tests for Overidentifying Restrictions in Factor-Augmented VAR Models

Speaker

Xu Han

Personal Website

Job Market Paper

Université Laval

Venue

Board Room 629, Level 6, Colin Clark Building

Abstract

This paper develops tests for overidentifying restrictions in Factor-Augmented Vector Autoregressive (FAVAR) models. The FAVAR combines a high-dimensional factor model and a conventional VAR for the latent factors. The identification of structural shocks in FAVAR can lead to restrictions on the factor loadings of many variables, so it can involve infinitely many identifying restrictions as the number of cross sections goes to infinity. Our focus is to test the joint null hypothesis that all the restrictions are satisfied. Conventional tests cannot be used due to the large dimension. We transform the infinite-dimensional problem into a finite-dimensional one by combining the individual statistics across the cross section dimension. We find the limit distribution of our joint test statistic under the null hypothesis and prove that it is consistent against the alternative that a fraction of or all identifying restrictions are violated. The Monte Carlo results show that the joint test statistic has good finite-sample size and power. We implement our tests to an updated version of Stock and Watson’s (2005) data set. The proposed test rejects the null hypotheses that the number of fast shocks is two or more, but does not reject the null that there is only one fast shock, which is the monetary policy shock. This result is further confirmed by the impulse responses of major macroeconomic variables to the monetary policy shock: the impulse responses based on one fast shock are generally more economically plausible than those based on two or more fast shocks; and the price puzzle is either considerably reduced or entirely solved for all price indexes when only one fast shock is used.

About the Speaker

Xu Han is currently a job market candidate from the Department of Economics at North Carolina State University. His dissertation title is "Structural Breaks, Model Selection, and overidentification in Dynamic Factor Models". Xu Han's main research area is econometric theory and applied econometrics with focus on high dimensional factor models, forecasting, and model and variable selection. He is also interested in empirical macro/monetary economics and empirical finance.

Peer Effects, Fast Food Consumption and Adolescent Weight Gain

Speaker

Myra Yazbeck

Personal Website

Job Market Paper

Université Laval

Venue

Board Room 629, Level 6, Colin Clark Building

Abstract

This paper aims at opening the black box of peer effects in adolescent weight gain. Using Add Health data on secondary schools in the U.S., we investigate whether these effects partly flow through the eating habits channel. Adolescents are assumed to interact through a friendship social network. We first propose a social interaction model of fast food consumption. Our approach allows to control for correlated effects at the network level and to solve the simultaneity (reflection) prob-lem. We exploit results by Bramoullé, Djebbari and Fortin (2009) which show that if there are two agents who are separated by a link of distance 3 within a network (i.e., two adolescents who are not friends but are linked by two friends), peer effects are identified. The model is estimated using max-imum likelihood and generalized 2SLS strategies. We also estimate a panel dynamic weight gain production function relating an adolescent’s Body Mass Index (BMI) to his current fast food con-sumption and his lagged BMI level. Results show that there are positive significant peer effects in fast food consumption among adolescents belonging to a same friendship school network. The es-timated social multiplier is 1.59. Our results also suggest that, at the network level, an extra day of weekly fast food restaurant visits increases BMI by 2.4%, when peer effects are taken into account.

About the Speaker

Myra Yazbeck is a Post-doctoral Fellow at the Department of Epidemiology, Biostatistics and Occupational Health at McGill University. She has a Ph.D in Economics from Université Laval with specialization in Labour Economics and Applied Econometrics. Her research interests are mainly in the field of health and public economics. Dr. Yazbeck's dissertation focuses on the impact of social networks on health outcomes. Currently, she is developing an expertise in health inequality and health care economics. She is now working on elaborating a research project that incorporates social networks’ effects in health care technologies.