https://hdl.handle.net/2123/6615 2026-06-13T14:53:31Z https://hdl.handle.net/2123/33664 Trend-cycle decomposition in the presence of large shocks Kamber, Gunes; Morley, James; Wong, Benjamin We introduce some refinements of the Beveridge-Nelson filter to help address possible distortions from large shocks. We then compare how the Beveridge-Nelson filter and other popular univariate trend-cycle decomposition methods perform given the extreme outliers associated with the Covid recession. Real-time estimates of the output gap based on the Hodrick-Prescott filter are highly unreliable in the years just prior to the pandemic, although the revised estimates during the pandemic are similar to those of the more reliable Beveridge-Nelson filter. The Hamilton filter suffers from base effects that produce a mechanical spike in the estimated output gap exactly two years after the onset of the pandemic, in line with the filter horizon. Given projected data with a simulated Covid-like shock, both the Hodrick-Prescott and Hamilton filters overstate the true reduction in the output gap and fail to capture the implied movements in trend output. The Hodrick-Prescott filter generates a spurious transitory boom just prior to the simulated shock, while the Hamilton filter produces another mechanical spike exactly two years after the simulated shock, as well as an ongoing divergence in forecasted values of the output gap away from zero. Only the Beveridge-Nelson filter correctly forecasts trend and cycle movements when faced with a Covid-like shock. 2025-01-01T00:00:00Z https://hdl.handle.net/2123/32753 Zero Interest Policy & the New Abnormal: A Critique, by Michael Beenstock (Oxford University Press, Oxford, UK, 2022) Morley, James Book review of Zero Interest Policy & the New Abnormal: A Critique, by Michael Beenstock (Oxford University Press, Oxford, UK, 2022) 2024-01-01T00:00:00Z https://hdl.handle.net/2123/32590 Promotion and demotion contests Levy, Jonathan; Zhang, Jingjing With a fixed prize budget, to increase total effort, we design a two-stage lottery contest where heterogeneous agents face the prospect of promotion and the threat of demotion from one stage to the next. We develop two competing theoretical models to generate predictions about behavior: (i) the standard economic model and (ii) a behavioral model where agents derive non-monetary utility from winning. The experimental results provide strong support for the use of promotion and demotion in contests when abilities are homogeneous, however, they do not provide strong support for the use of promotion and demotion in contests when ability differences are large. Our experimental results are consistent with the predictions made by the behavioral model. 2024-01-01T00:00:00Z https://hdl.handle.net/2123/32586 It’s not you (well, it is a bit you), it’s me: Self- versus social image in warm-glow giving Grossman, Philip J.; Levy, Jonathan Attempts by charities to motivate giving tend to focus on potential donors’ altruistic tendencies. However, prior research suggests that approximately 50% of individuals are to some extent motivated by warm glow, the satisfaction received from the act of giving. The satisfaction derives from looking good to themselves (self-image) and/or to others (social image). We conduct an online experiment on MTurk participants (n = 960) with a more realistic simulation of being watched to determine the importance of self- and social image to warm-glow giving. We find evidence that suggests that social image concerns do not increase the likelihood that someone will give but they do increase the amount given; average giving is significantly higher in the treatments when feelings of being watched are stimulated. Our results suggest that charities looking to increase their donor bases might effectively do so by focusing on self-image concerns. Charities wishing to increase the amount donated might effectively do so by focusing on the social image concerns of the donor. 2024-01-01T00:00:00Z https://hdl.handle.net/2123/32193 Did marginal propensities to consume change with the housing boom and bust? Cho, Yunho; Morley, James; Singh, Aarti We extend a widely used semi-structural model to identify and estimate dynamic consumption elasticities with respect to transitory income shocks. Applying our model to household survey data, we find a structural break in marginal propensities to consume following the end of the housing market boom, with the average across households increasing significantly. There is important heterogeneity by different household balance sheet characteristics, and the increase in the average appears to be driven by higher short-run consumption elasticities for homeowners with low liquid wealth. The change in consumption behavior is consistent with tighter borrowing constraints more than a shift in wealth distributions. 2024-01-01T00:00:00Z https://hdl.handle.net/2123/31829 Does the Survey of Professional Forecasters help predict the shape of recessions in real time? Eo, Yunjong; Morley, James An updated version of our Markov-switching model of U.S. real GDP suggests the COVID-19 recession was more U-shaped than L-shaped. As with linear time series models, it is important to account for extreme outliers during the pandemic, but a simple decay function for volatility from 2020Q2 leads to robust inferences. When considering whether our model could have predicted the shape of recessions in real time, we find that feeding in data from the Survey of Professional Forecasters accurately predicts the nature of recovery at the time of the trough for each of the last four recessions, including the COVID-19 recession. 2023-01-01T00:00:00Z https://hdl.handle.net/2123/31625 Quarterly data for examining water market functionality in the sMDB Zhao, Maruge; Ancev, Tiho; Vervoort, R.Willem This dataset provides quarterly statistics generated based on transactional level water trading data for key trading zones in the sMDB. All market transaction data were sourced from NSW and VIC state water registers. Ratios of irrigation water in a trading zone devoted to cotton and fruit & nut trees were calculated based on farm survey data provided by ABS. Quarterly rainfall data is based on monthly rainfall data provided by BoM and further processed by ABARES for catchment level analysis. 2023-08-30T00:00:00Z https://hdl.handle.net/2123/29976 Estimating the euro area output gap using multivariate information and addressing the COVID-19 pandemic Morley, James; Rodriguez-Palenzuela, Diego; Sun, Yiqiao; Wong, Benjamin We estimate the euro area output gap by applying the Beveridge–Nelson decomposition based on a large Bayesian vector autoregression. Our approach incorporates multivariate information through the inclusion of a wide range of variables in the analysis and addresses data issues associated with the COVID-19 pandemic. The estimated output gap lines up well with the CEPR chronology of the business cycle for the euro area and we find that hours worked, more than the unemployment rate, provides the key source of information about labor utilization in the economy, especially in pinning down the depth of the output gap during the COVID-19 recession when the unemployment rate rose only moderately. Our findings confirm that labor market adjustments to the business cycle in the euro area occur more through the intensive, rather than extensive, margin. 2023-01-01T00:00:00Z https://hdl.handle.net/2123/29614 Intergenerational disadvantage: Learning about equal opportunity from social assistance receipt Cobb-Clark, Deborah A; Dahmann, Sarah C; Salamanca, Nicolas; Zhu, Anna We use variation in the intergenerational persistence across social assistance benefits over 18 years to study the drivers of intergenerational disadvantage. Young people are more likely to receive social assistance if their parents received disability, caring, or single parent benefits, and less likely if they received unemployment benefits. Disparity in intergenerational persistence across benefit types suggests that parental bad luck has broader consequences for youth disadvantage than do their personal choices. Using the intensive margin and timing of parental social assistance to account for unobserved heterogeneity indicates that intergenerational disadvantage is more likely driven by poverty traps than welfare cultures. 2022-01-01T00:00:00Z https://hdl.handle.net/2123/29547 Cyclical signals from the labor market Morley, James; Berger, Tino; Boll, Paul David; Wong, Benjamin We consider which labor market variables are the most informative for estimating and nowcasting the US output gap using a multivariate trend-cycle decomposition. Although the unemployment rate clearly contains important cyclical information, it also appears to reflect more persistent movements related to labor force participation that could distort inferences about the output gap. Instead, we show that the alternative U-2 unemployment rate (job losers as a percentage of the labor force) provides a more purely cyclical indicator of labor market conditions. To a lesser extent, but consistent with a link of the output gap to real labor costs in a New Keynesian setting, we also find that average hourly earnings are informative about the output gap. 2022-01-01T00:00:00Z https://hdl.handle.net/2123/29090 Effect of lockdown on mental health in Australia: evidence from a natural experiment analysing a longitudinal probability sample survey Butterworth, P.; Schurer, S.; Trinh, T.-A.; Vera-Toscano, E.; Wooden, M. Background: Many studies have examined population mental health during the COVID-19 pandemic but have been unable to isolate the direct effect of lockdowns. The aim of this study was to examine changes in the mental health of Australians aged 15 years and older during the COVID-19 pandemic using a quasi-experimental design to disentangle the lockdown effect. Methods: We analysed data from ten annual waves (2011–20) of the longitudinal Household, Income and Labour Dynamics in Australia (HILDA) Survey to identify changes in the mental health of respondents from the pre-COVID-19 period (2011–19) to the COVID-19 period (2020). Difference-in-differences models were used to compare these changes between respondents in the state of Victoria who were exposed to lockdown at the time of the 2020 interviews (treatment group) and respondents living elsewhere in Australia (who were living relatively free of restrictions; control group). The models included state, year (survey wave), and person-specific fixed effects. Mental health was assessed using the five-item Mental Health Inventory (MHI-5), which was included in the self-complete questionnaire administered during the survey. Findings: The analysis sample comprised 151 583 observations obtained from 20 839 individuals from 2011 to 2020. The treatment group included 3568 individuals with a total of 37 578 observations (34 010 in the pre-COVID-19 and 3568 in the COVID-19 period), and the control group included 17 271 individuals with 114 005 observations (102 867 in the pre-COVID-19 and 11 138 in the COVID-19 period). Mean MHI-5 scores did not differ between the treatment group (72·9 points [95% CI 72·8–73·2]) and control group (73·2 points [73·1–73·3]) in the pre-COVID-19 period. In the COVID-19 period, decreased mean scores were seen in both the treatment group (69·6 points [69·0–70·2]) and control group (70·8 points [70·5–71·2]). Difference-in-differences estimation showed a small but statistically significant effect of lockdown on MHI-5 scores, with greater decline for residents of Victoria in 2020 than for those in the rest of Australia (difference –1·4 points [95% CI –1·7 to –1·2]). Stratified analyses showed that this lockdown effect was larger for females (_2·2 points [–2·6 to –1·7]) than for males (_0·6 [–0·8 to –0·5]), and even larger for women in couples with children younger than 15 years (_4·4 points [–5·0 to –3·8]), and for females who lived in flats or apartments (_4·1 points [–5·4 to –2·8]) or semi-detached houses, terraced houses, or townhouses (_4·8 points [–6·4 to –3·2]). Interpretation: The imposition of lockdowns was associated with a modest negative change in overall population mental health. The results suggest that the mental health effects of lockdowns differ by population subgroups and for some might have exaggerated existing inequalities in mental health. Although lockdowns have been an important public health tool in suppressing community transmission of COVID-19, more research is needed into the potential psychosocial impacts of such interventions to inform their future use. Funding: US National Institutes of Health. 2022-01-01T00:00:00Z https://hdl.handle.net/2123/29050 Labor Unions and Covid-19: Beyond the Workplace Naeim, Peyman Firouzi; Rahimzadeh, Golnoush Person-to-person transmission in the workplace is thought to play a crucial role in the spread of COVID-19. Labor unions are among the largest institutions in the United States, and their role in regulating employee-employer relations is hard to ignore. Costly efforts to contain the virus combined with the monopoly and collective voice faces of unions emphasize the role of unions in shaping the workforce’s response to the pandemic, where the effects can be amplified by the further transmission of the virus beyond the workplace. We utilize state-level data and a dynamic spatial probability model to quantify the total effect of both economic activities and union membership. We find that increasing economic activity by recruiting 1,000 new employees from unemployed individuals would lead to 368 more COVID-19 cases by November 2020 and before the vaccine rollout. However, increasing the union size by 1,000 while keeping the employment level constant would lead to 111 fewer COVID-19 cases in the same period. 2022-01-01T00:00:00Z https://hdl.handle.net/2123/28685 When is discretionary fiscal policy effective? Morley, James; Fazzari, Steven; Panovska, Irina We investigate the effects of discretionary changes in government spending and taxes using a medium-scale nonlinear vector autoregressive model with policy shocks identified via sign restrictions. Tax cuts and spending increases have larger stimulative effects when there is excess slack in the economy, while they are much less effective, especially in the case of government spending increases, when the economy is close to potential. We find that contractionary shocks have larger effects than expansionary shocks across the business cycle, but this is much more pronounced during deep recessions and sluggish recoveries than in robust expansions. Notably, tax increases are highly contractionary and largely self-defeating in reducing the debt-to-GDP ratio when the economy is in a deep recession. The effectiveness of discretionary government spending, including its state dependence, appears to be almost entirely due to the response of consumption. The responses of both consumption and investment to discretionary tax changes are state dependent, but investment plays the larger quantitative role. 2021-01-01T00:00:00Z https://hdl.handle.net/2123/28449 Zero-COVID Policies: Melbourne's 112-Day Hard Lockdown Experiment Harmed Mostly Mothers Schurer, Stefanie; Atalay, Kadir; Glozier, Nick; Vera-Toscano, Esperanza; Wooden, Mark Lockdowns were used worldwide to mitigate the spread of SARS-CoV-2. We demonstrate that the 112-day hard lockdown in Melbourne, Australia, the longest among OECD jurisdictions, exclusively penalized families with young children. To identify the causal impact of lockdown, we interrogated nationally-representative longitudinal survey data and exploited quasi- experimental variation in Melbourne’s lockdown, one that left other jurisdictions unaffected. Using difference-in-differences estimation, we found that, surprisingly, most vulnerable groups (the young, poor, lonely and those with previous mental health conditions) were left unscathed. However, we found mothers experienced significant, sizable declines in health and work hours, and increases in loneliness, despite feeling safer and being more active. Zero-COVID policies are not as harmful as may have been expected but came at high cost to mothers in society. One-Sentence Summary: Melbourne’s hard lockdown left most vulnerable groups unscathed but led to greater ill- health and loneliness in mothers. 2022-01-01T00:00:00Z https://hdl.handle.net/2123/28447 Zero-COVID Policies: Melbourne's 112-Day Hard Lockdown Experiment Harmed Mostly Mothers Schurer, Stefanie; Atalay, Kadir; Glozier, Nick; Toscano, Esperanza; Wooden, Mark Lockdowns were used worldwide to mitigate the spread of SARS-CoV-2. We demonstrate that the 112-day hard lockdown in Melbourne, Australia, the longest among OECD jurisdictions, exclusively penalized families with young children. To identify the causal impact of lockdown on human life, we interrogated nationally-representative longitudinal survey data and quasi-experimental variation in Melbourne's lockdown, one that left other jurisdictions unaffected. Surprisingly, we found most vulnerable groups (the young, poor, lonely and those with previous mental health conditions) were left unscathed. However, we found mothers experienced significant, sizable declines in health and work hours, and increases in loneliness, despite feeling safer and being more active. Zero-COVID policies are not as harmful as may have been expected but came at high cost to mothers in society. 2022-01-01T00:00:00Z https://hdl.handle.net/2123/28264 Poverty and food insecurity during COVID-19: Phone-survey evidence from rural and urban Myanmar in 2020 Headey, Derek; Goudet, Sophie; Lambrecht, Isabel; Maffioli, Elisa Maria; Oo, Than Zaw; Russell, Toth Myanmar first experienced the COVID-19 crisis as a relatively brief economic shock in early 2020, before the economy was later engulfed by a prolonged surge in COVID-19 cases from September 2020 onwards. To analyze poverty and food security in Myanmar during 2020 we surveyed over 2000 households per month from June-December in urban Yangon and the rural dry zone. By June, households had suffered dramatic increases in poverty, but even steeper increases accompanied the rise in COVID-19 cases from September onwards. Increases in poverty were much larger in urban areas, although poverty was always more prevalent in the rural sample. However, urban households were twice as likely to report food insecurity experiences, suggesting rural populations felt less food insecure throughout the crisis. 2022-01-01T00:00:00Z https://hdl.handle.net/2123/27844 Estimating household consumption insurance Chatterjee, Arpita; Morley, James; Singh, Aarti Blundell, Pistaferri, and Preston (American Economic Review, 2008, 98(5), 1887–1921) report an estimate of household consumption insurance with respect to permanent income shocks of 36%. In replicating findings for their model and data, we find that this estimate is distorted by a code error and is not robust to weighting scheme for generalized method of moments (GMM) or consideration of quasi maximum likelihood estimation (QMLE), which produces a significantly higher estimate of consumption insurance at 55%. For sub-groups by age and education, the differences between estimates across methods are even more pronounced, and QMLE provides new insights into heterogeneity across households compared to the original study. Monte Carlo experiments using non-normal shocks suggest that consumption insurance estimates for the model are more accurate for QMLE than GMM, including when correcting for bias and especially given a smaller sample such as is only available when looking at sub-groups. 2021-01-01T00:00:00Z https://hdl.handle.net/2123/27328 Likelihood-ratio-based confidence sets for the timing of structural breaks Eo, Yunjong; Morley, James We propose the use of likelihood-ratio-based confidence sets for the timing of structural breaks in parameters from time series regression models. The confidence sets are valid for the broad setting of a system of multivariate linear regression equations under fairly general assumptions about the error and regressors, and allowing for multiple breaks in mean and variance parameters. In our asymptotic analysis, we determine the critical values for a likelihood ratio test of a break date and the expected length of a confidence set constructed by inverting the likelihood ratio test. Notably, the likelihood-ratio-based confidence sets are more precise than other confidence sets considered in the literature. Monte Carlo analysis confirms their greater precision in finite samples, including in terms of maintaining accurate coverage even when the sample size or magnitude of a break is small. An application to postwar U.S. real gross domestic product and consumption leads to a shorter 95% confidence set for the timing of the “Great Moderation” in the mid-1980s than previously found in the literature. Furthermore, when taking co-integration between output and consumption into account, confidence sets for structural break dates become even shorter and suggest a “productivity growth slowdown” in the early 1970s and an additional large, abrupt decline in long-run growth in the mid-1990s. 2015-01-01T00:00:00Z https://hdl.handle.net/2123/27324 Nowcasting the output gap Berger, Tino; Morley, James; Wong, Benjamin We propose a way to directly nowcast the output gap using the Beveridge–Nelson decomposition based on a mixed-frequency Bayesian VAR. The mixed-frequency approach produces similar but more timely estimates of the U.S. output gap compared to those based on a quarterly model, the CBO measure of potential, or the HP filter. We find that within-quarter nowcasts for the output gap are more reliable than for output growth, with monthly indicators for a credit risk spread, consumer sentiment, and the unemployment rate providing particularly useful new information about the final estimate of the output gap. An out-of-sample analysis of the COVID-19 crisis anticipates the exceptionally large negative output gap of -8.3% in 2020Q2 before the release of real GDP data for the quarter, with both conditional and scenario nowcasts tracking a dramatic decline in the output gap given the April data. 2020-01-01T00:00:00Z https://hdl.handle.net/2123/27323 Why Has the U.S. Economy Stagnated Since the Great Recession? Eo, Yunjong; Morley, James Since the Great Recession in 2007–2009, U.S. real GDP has failed to return to its previously projected path, a phenomenon widely associated with secular stagnation. We investigate whether this stagnation was due to hysteresis effects from the Great Recession, a persistent negative output gap following the recession, or slower trend growth for other reasons. To do so, we develop a new Markov-switching time series model of output growth that accommodates two different types of recessions: those that permanently alter the level of real GDP and those with only temporary effects. We also account for structural change in trend growth. Estimates from our model suggest that the Great Recession generated a large, persistent negative output gap rather than any substantial hysteresis effects, with the economy eventually recovering to a lower trend path that appears to be due to a reduction in productivity growth that began prior to the onset of the Great Recession. 2022-01-01T00:00:00Z https://hdl.handle.net/2123/27322 Estimating and accounting for the output gap with large Bayesian vector autoregressions Morley, James; Wong, Benjamin We consider how to estimate the trend and cycle of a time series, such as real gross domestic product, given a large information set. Our approach makes use of the Beveridge–Nelson decomposition based on a vector autoregression, but with two practical considerations. First, we show how to determine which conditioning variables span the relevant information by directly accounting for the Beveridge–Nelson trend and cycle in terms of contributions from different forecast errors. Second, we employ Bayesian shrinkage to avoid overfitting in finite samples when estimating models that are large enough to include many possible sources of information. An empirical application with up to 138 variables covering various aspects of the US economy reveals that the unemployment rate, inflation, and, to a lesser extent, housing starts, aggregate consumption, stock prices, real money balances, and the federal funds rate contain relevant information beyond that in output growth for estimating the output gap, with estimates largely robust to substituting some of these variables or incorporating additional variables. 2020-01-01T00:00:00Z https://hdl.handle.net/2123/27080 The Australian Twins Economic Preferences Survey Kettlewell, Nathan; Tymula, Agnieszka This paper describes the Australian Twins Economic Preferences Survey (ATEPS). The dataset comprises a wide variety of preference and behavioral measures (risk aversion, impatience, ambiguity aversion, trust, confidence) elicited using incentivised decision tasks. 1,120 Australian adult twins (560 pairs) completed the survey, making it one of the largest datasets containing incentivised preference measures of twins. As the survey was conducted during the COVID-19 pandemic, we also collected information on experiences related to the pandemic, along with a variety of questions on political attitudes and mental wellbeing. We hope that ATEPS can make a valuable contribution to social science and genetics research. 2021-01-01T00:00:00Z https://hdl.handle.net/2123/27081 The Australian Twins Economic Preferences Survey Kettlewell, Nathan; Tymula, Agnieszka This paper describes the Australian Twins Economic Preferences Survey (ATEPS). The dataset comprises a wide variety of preference and behavioral measures (risk aversion, impatience, ambiguity aversion, trust, confidence) elicited using incentivised decision tasks. 1,120 Australian adult twins (560 pairs) completed the survey, making it one of the largest datasets containing incentivised preference measures of twins. As the survey was conducted during the COVID-19 pandemic, we also collected information on experiences related to the pandemic, along with a variety of questions on political attitudes and mental wellbeing. We hope that ATEPS can make a valuable contribution to social science and genetics research. 2021-01-01T00:00:00Z https://hdl.handle.net/2123/27078 The Heritability of Trust and Trustworthiness Depends on the Measure of Trust Kettlewell, Nathan; Tymula, Agnieszka Using a large sample of 1,120 twins, we estimated the heritability of trust using four distinct measures of trust - domain-specific political trust, general self-reported trust, and incentivized behavioral trust and trustworthiness. Our results highlight the importance of measuring trust in a context because its heritability differs substantially across the four measures, from 0% to 37%. Moreover, we provide the first evidence on the heritability of political trust which we estimate to be 37%. Furthermore, like the heritability, the environmental correlates of trust also vary across the different measures with political trust having the largest set of environmental covariates. The perceptions of COVID-19 health and income risks are among the unique correlates of political trust, with participants who are more worried about financial and health consequences of COVID-19, trusting politicians less, stressing the importance of trust in political leaders during a health crisis. 2021-01-01T00:00:00Z https://hdl.handle.net/2123/27077 The Heritability of Trust and Trustworthiness Depends on the Measure of Trust Kettlewell, Nathan; Tymula, Agnieszka Using a large sample of 1,120 twins, we estimated the heritability of trust using four distinct measures of trust - domain-specific political trust, general self-reported trust, and incentivized behavioral trust and trustworthiness. Our results highlight the importance of measuring trust in a context because its heritability differs substantially across the four measures, from 0% to 37%. Moreover, we provide the first evidence on the heritability of political trust which we estimate to be 37%. Furthermore, like the heritability, the environmental correlates of trust also vary across the different measures with political trust having the largest set of environmental covariates. The perceptions of COVID-19 health and income risks are among the unique correlates of political trust, with participants who are more worried about financial and health consequences of COVID-19, trusting politicians less, stressing the importance of trust in political leaders during a health crisis. 2021-01-01T00:00:00Z https://hdl.handle.net/2123/26587 Psychological, social and cognitive resources and the mental wellbeing of the poor Cobb-Clark, Deborah; Kettlewell, Nathan Our study takes advantage of unique data to quantify deficits in the psychosocial and cognitive resources of an extremely vulnerable subpopulation–those experiencing housing vulnerability–in an advanced, high-income country (Australia). Groups such as these are often impossible to study using nationally representative data sources because they make up a small share of the overall population. We show that those experiencing housing vulnerability sleep less well, have more limited cognitive functioning, and less social capital than do those in the general population. They are also less emotionally stable, less conscientious, more external, and more risk tolerant. Collectively, these deficits in psychosocial and cognitive resources account for between 24–42% of their reduced life satisfaction and their increased mental distress and loneliness. These traits also account for a large proportion of the gap in mental wellbeing across different levels of housing vulnerability. 2021-01-01T00:00:00Z https://hdl.handle.net/2123/26555 Debt and financial market contagion Hsiao, Cody Yu-Ling; Morley, James We empirically investigate why financial crises spread from one country to another. For our analysis, we develop a new multiple-channel test of financial market contagion and construct indices of crisis severity in equity markets in order to examine how the transmission of shocks across countries can be related to direct linkages between countries or to common characteristics. Based on network analysis with our proposed multiple-channel test for crises between 2007 and 2021, we find that the Great Recession is the most pervasive across countries, followed by the European sovereign debt crisis and the recent COVID pandemic, with the subprime mortgage crisis being the least pervasive. Our main finding is that similar public, private and external debt characteristics are particularly helpful in explaining the transmission of financial shocks during crises. Fiscal deficits appear more important than current account deficits, while stage of economic development matters more than regional linkages, but none of these indicators is as important as debt. 2021-01-01T00:00:00Z https://hdl.handle.net/2123/26549 Age, Industry, and Unemployment Risk During a Pandemic Lockdown Graham, James; Ozbilgin, Murat This paper models the macroeconomic and distributional consequences of lockdown shocks during the COVID-19 pandemic. The model features heterogeneous life-cycle households, labor market search and matching frictions, and multiple industries of employment. We calibrate the model to data from New Zealand, where the health effects of the pandemic were especially mild. In this context, we model lockdowns as supply shocks, ignoring the demand shocks associated with health concerns about the virus. We then study the impact of a large-scale wage subsidy scheme implemented during the lockdown. The policy prevents job losses equivalent to 6.5% of steady state employment. Moreover, we find significant heterogeneity in its impact. The subsidy saves 17.2% of jobs for workers under the age of 30, but just 2.6% of jobs for those over 50. Nevertheless, our welfare analysis of fiscal alternatives shows that the young prefer increases in unemployment transfers as this enables greater consumption smoothing across employment states. 2021-01-01T00:00:00Z https://hdl.handle.net/2123/26525 COVID-19, social isolation and the mental health of autistic people and their families: A qualitative study. Pellicano, Elizabeth; Brett, Simon; den Houting, Jacquiline; Heyworth, Melanie; Magiati, Iliana; Steward, Robyn; Urbanowicz, Anna; Stears, Marc LAY ABSTRACT: In this study, we show that autistic people and their families have found it very difficult to deal with the lockdowns during the COVID-19 pandemic. Autistic and non-autistic researchers spoke to 144 people, including 44 autistic adults, 84 parents of autistic children and 16 autistic young people (12-18_years old). We asked them about their everyday lives and mental health during lockdown. People told us that they enjoyed having fewer obligations and demands compared to pre-COVID-19 life. They felt that life was quieter and calmer. But people also told us again and again how much they missed meeting people in real life, especially their friends, and their therapists and support workers. People told us that their mental health suffered because they did not have contact with their friends and services. Importantly, many people (including researchers) think that autistic people do not want friends or to be around people. But our results show that is not true. Many autistic people do want friends and to be around other people. Some people's mental health has been damaged by not being able to see people during COVID-19. Autistic people need support in many areas of life so they can keep socialising and seeing their friends even through difficult times, like pandemics. 2021-01-01T00:00:00Z https://hdl.handle.net/2123/26415 An Experimental Comparison of Risky and Riskless Choice—Limitations of Prospect Theory and Expected Utility Theory Chung, Hui-Kuan; Glimcher, Paul; Tymula, Agnieszka Prospect theory, used descriptively for decisions under both risk and certainty, presumes concave utility over gains and convex utility over losses; a pattern widely seen in lottery tasks. Although such discontinuous gain-loss reference-dependence is also used to model riskless choices, only limited empirical evidence supports this use. In incentive-compatible experiments, we find that gain-loss reflection effects are not observed under riskless choice as predicted by prospect theory, even while in the same subjects gain-loss reflection effects are observed under risk. Our empirical results challenge the application of choice models across both risky and riskless domains. 2019-01-01T00:00:00Z https://hdl.handle.net/2123/26414 Altruism among Consumers as Donors Heger, Stephanie A.; Slonim, Robert; Tausch, Franziska; Tymula, Agnieszka Like most charitable and non-profit organizations, the arts, cultural institutions and universities often ask individuals for financial gifts to help fund their operations. However, a key difference is that the individuals who are solicited for charitable donations by arts and cultural institutions are oftentimes also purchasing services from the same institution. Thus, an open question is whether, and how, individuals make trade-offs between charitable gifts and consumer purchases from the same institution. We investigate this question in an online experiment that asks Sydneysiders to make a series of decisions between donating to the iconic Sydney Opera House, purchasing merchandise from the Sydney Opera House and keeping money. Our findings show that demand for SOH merchandise and SOH donations are substitutes. Further, we find evidence that increasing the individuals’ awareness of the substitutability between money received from donations and money received from the sale of merchandise, increases the cross-price elasticity. This is particularly true for those individuals who positively identify with the Opera House. Our results suggest that the unique nature of arts, cultural and educational institutions as recipients of donations and providers of services mean that fundraising among “patrons” may crowd-in additional revenue. 2021-01-01T00:00:00Z https://hdl.handle.net/2123/26404 Loss aversion and competition in Vickrey auctions: Money ain't no good Rosato, Antonio; Tymula, Agnieszka A key prediction of expectations-based reference-dependent preferences and loss aversion in second-price auctions with private values is that the number of bidders should affect bids in auctions for real objects but not in auctions with induced monetary values. In order to test this distinctive comparative statics prediction, we develop an experiment where subjects bid in multiple auctions for real objects as well as auctions with induced values, each time facing a different number of rivals. Our results are broadly consistent with expectations-based reference-dependent preferences and loss aversion. We find that in real-object auctions bids decline with the intensity of competition whereas in induced-value auctions, instead, bids do not vary with the intensity of competition. Our results suggest that bidders may behave differently in real-object auctions than in induced-value ones, casting some doubt on the extent to which findings from induced-value laboratory experiments can be transferred to the field. 2019-01-01T00:00:00Z https://hdl.handle.net/2123/26370 Waterfall illusion in risky choice – exposure to outcome-irrelevant gambles affects subsequent valuation of risky gambles Guo, Julie; Tymula, Agnieszka Based on recent discoveries in economics, neuroscience, and psychology, we hypothesize that pure exposure to high-payoff or low-payoff gambles can change people's subsequent reported valuations of gambles and confirm this hypothesis in a laboratory experiment. In particular, the same participants within the same experimental session provide higher valuations for the same gambles after they have been exposed to low-payoff gambles compared to after they have been exposed to high-payoff gambles. These results are consistent with the current understanding of how the nervous system encodes payoffs and imply that even brief experiences that do not change wealth can impact an individual's reported valuations of risky options. 2021-01-01T00:00:00Z https://hdl.handle.net/2123/26207 Divorce early or divorce late? The long-term financial consequences. Fisher, Hayley; Low, Hamish We use data from the UK Household Longitudinal Study (Understanding Society) to examine income, housing and wealth for those who divorce in England and Wales. We consider variation between different generations and examine how circumstances at divorce, the year of divorce, and re-partnering behaviour post-divorce affect our results. We find that women in all cohorts have lower household income if divorced, but that men’s household income does not suffer. Men and women in all cohorts have lower housing wealth if they have divorced. Remarriage is an important pathway for recovery. 2018-01-01T00:00:00Z https://hdl.handle.net/2123/25643 Implications of state-dependent pricing for DSGE model-based policy analysis in Indonesia Lie, Denny This paper builds a small open economy dynamic stochastic general equilibrium (DSGE) model for Indonesia with state-dependent pricing (SDP) and studies its implications for policy analysis. Variations in the extensive margin of price adjustment under SDP are shown to non-trivially affect the model-generated variance decompositions and impulse responses to various shocks. DSGE model-based policy analyses conducted without this extensive margin feature might therefore lead to inaccurate policy prescriptions. In particular, the SDP model would call for a greater degree of monetary easing in response to the COVID-19 pandemic, than that prescribed by the standard time-dependent pricing (TDP) model. 2021-01-01T00:00:00Z https://hdl.handle.net/2123/25479 Increased risk-taking, not loss tolerance, drives adolescents’ propensity to choose risky prospects more often under peer observation Tymula, Agnieszka; Wang, Xueting Relative to adults, adolescents make more welfare-decreasing decisions, especially in the presence of peers. The consequences of these decisions result in substantial individual and societal losses in terms of lives lost, injury, hospitalization costs, and foregone opportunities. In this paper, we use laboratory within-subject and between-subject experiments with younger (12–17 years old) and older (18–24 years old) adolescents to identify which economic preference is affected by peer observation in adolescence — risk tolerance in gains, risk tolerance in losses, and/or loss aversion. We find that in our study, while observed by peers, 18–24-year-old adolescents became more risk-tolerant both in gains and in losses but more loss averse. We discuss the potential mechanisms driving the result and its policy implications. 2021-01-01T00:00:00Z https://hdl.handle.net/2123/24846 Age, Industry, and Unemployment Risk During a Pandemic Lockdown Graham, James; Ozbilgin, Murat This paper models the macroeconomic and distributional consequences of lockdown shocks during the COVID-19 pandemic. The model features heterogeneous life-cycle households, labor search, employment risk, and multiple industries. We present an application to New Zealand, where the health effects of the pandemic were especially mild relative to other countries. This allows us to study the effects of lockdowns absent demand shocks induced by health concerns about the virus itself. We use model counterfactuals to study the impact of a large wage subsidy scheme implemented in New Zealand. We find that the subsidy prevented a large number of job losses, saving around 6.8\% of steady state employment. We then study the welfare consequences of several alternative fiscal interventions during the pandemic. While the wage subsidy prevents much unemployment among young households, we find that they enjoy larger welfare gains from a policy that raises unemployment benefits during the pandemic. 2021-01-01T00:00:00Z https://hdl.handle.net/2123/9993 A classification of bargaining solutions by evolutionary origin Hwang, Sung-Ha; Newton, Jonathan For games of contracting under perturbed best response dynamics, varying the perturbations along two dimensions (uniform vs. logit, directed vs. undirected) gives four possibilities. Three of these select differing major bargaining solutions as stochastically stable. The fourth possibility yields a new bargaining solution which exhibits significant nonmonotonicities and demonstrates the interplay of two key drivers of evolutionary selection: (i) the ease of making errors; (ii) the ease of responding to errors. 2014-01-01T00:00:00Z https://hdl.handle.net/2123/9951 Monkey see, monkey do: truth-telling in matching algorithms and the manipulation of others Guillén, Pablo; Hakimov, Rustamdjan We test the effect of the amount of information on the strategies played by others in the theoretically strategy-proof Top Trading Cycles (TTC) mechanism. We find that providing limited information on the strategies played by others has a negative and significant effect in truth-telling rates. Subjects report truthfully more often when either full information or no information on the strategies played by others is available. Our results have potentially important implications for the design of markets based on strategy-proof matching algorithms. 2014-01-01T00:00:00Z https://hdl.handle.net/2123/9732 Flexible valuations for consumer goods as measured by the Becker-DeGroot-Marschak mechanism Tymula, Agnieszka; Woelbert, Eva; Glimcher, Paul Economists have long been interested in mechanisms that lead to truthful revelation of the relative values individuals place on diff erent goods. In this paper we take one of the most popular of such mechanisms, and show that valuations obtained using the Becker-DeGroot-Marschak (BDM) procedure depend on the distribution of prices presented to subjects when the mechanism is implemented. We show that this eff ect of price distribution occurs quite frequently, significantly impacts reported valuations, and that it is unlikely to be caused by misconceptions about BDM. This eff ect is the largest when pricing distributions show a large peak just above or just below an individual's average valuation of the good being considered. We also show that a simple non-incentive compatible subject rating of the desirability of goods can be used to predict the likelihood that pricing distributions will influence BDM valuations. Valuations for goods subjects report that they most want to purchase are most likely to be influenced by distributional structure. Our results challenge some of the dominant theoretical models of how BDM-like valuation procedures relate to standard notions of utility. 2013-11-01T00:00:00Z https://hdl.handle.net/2123/9560 A new solution for the moral hazard problem in team production Guillén, Pablo; Merrett, Danielle; Slonim, Robert We propose an intergroup competition scheme (ICS) to theoretically solve free-riding in team production and provide experimental evidence from a voluntary contribution mechanism (VCM) public goods game. The ICS includes an internal transfer payment from the lowest to highest contributing team proportional to the difference in group contributions. The ICS requires minimal information, makes the efficient contribution a dominant strategy and is budget balanced. These features make the ICS ideally suited to solve the moral hazard problem in team production. Our experiment demonstrates that the ICS raises contributions to almost reach optimality with appropriate parameters. We also show experimentally that the success of the ICS can be primarily attributed to the effect of higher returns and to the introduction of competition, and is not due to the introduction of potential losses or information regarding other groups. 2013-11-01T00:00:00Z https://hdl.handle.net/2123/9543 Competitive Screening of a Heterogeneous Labor Force and Corporate Teamwork Attitude Tymula, Agnieszka The aim of this paper is to analyze the impact of competition on the structure of incentive schemes, workforce composition and the degree of cooperation within firms. We show that in equilibrium high-ability workers, in order to distinguish themselves from the less able workforce, choose the incentive schemes that strongly rely on their own as well as their teammates' performance. They work harder on their own task and are more team-oriented than less skilled workers. Our paper stresses the sorting role of the incentives and provides a rationale for the emergence of different corporate teamwork practices. 2013-11-01T00:00:00Z https://hdl.handle.net/2123/9383 Between the Sword and the Wall: Spain’s Limited Options for Catalan Secessionism Griffiths, Ryan D.; Guillén, Pablo; Martinez i Coma, Ferran We propose a game theoretical model to assess the capacity of Catalonia to become a recognized, independent country with at least a de facto European Union (EU) membership. Support for Catalan independence is increasing for reasons pertaining to identity and economics. Spain can avoid a vote for independence by effectively ‘buying-out’ a proportion of the Catalan electorate with a funding agreement favorable to Catalonia. If, given the current economic circumstances, the buying-out strategy is too expensive, a proindependence vote is likely to pass. Our model predicts an agreement in which Spain and the European Union accommodate Catalan independence in exchange for Catalonia taking a share of the Spanish debt. If Spain and the EU do not accommodate, Spain becomes insolvent, which in turn destabilizes the EU. The current economic woes of Spain and the EU both contribute to the desire for Catalan independence and make it possible. 2013-09-01T00:00:00Z https://hdl.handle.net/2123/9362 On the Elicitation of Time Preference under Conditions of Risk Cheung, Stephen L. Andreoni and Sprenger (2012) report evidence that distinct utility functions govern choices under certainty and risk. I investigate the robustness of this result to the experimental design. I find that the effect disappears completely when a multiple price list instrument is used instead of a convex time budget design. Alternatively, the effect is reduced by half when sooner and later payment risks are realized using a single lottery instead of two independent lotteries. The result is thus at least partially driven by intertemporal diversification, supporting an explanation in terms of concavity of the intertemporal, and not only atemporal, utility function. 2013-09-01T00:00:00Z https://hdl.handle.net/2123/9340 Innovation in a generalized timing game Smirnov, Vladimir; Wait, Andrew We examine innovation as a timing game with complete information and observable actions in which firms decide when to enter a market. We characterize all pure strategy subgame perfect equilibria for the two-player symmetric game. In particular, we describe all subgame perfect equilibria when both the leader’s and the followers’ payoff functions are multi-peaked, non-monotonic and discontinuous. We find that there are potentially multiple equilibria, which could involve: joint adoption by both firms, with and without rent equalization; and, alternatively, single-firm adoption with a second-mover advantage. Economic applications are discussed including process and product innovation and the timing of the sale of an asset. 2013-08-01T00:00:00Z https://hdl.handle.net/2123/9271 File-Sharing and Film Revenues: An Empirical Analysis McKenzie, Jordi; Walls, W. D. This study examines the impact of peer-to-peer (P2P) file-sharing on the Australian theatrical film industry. Using a large data set of torrent downloads observed on three popular P2P networks, we find evidence of a sales displacement effect on box office revenues. However, although statistically significant, the economic significance of this displacement appears relatively small. To establish causality, we make use of two precedent-setting Australian Federal Court case rulings, as well as observed levels of contemporaneous downloading in geographically separated markets within Australia. We observe that the release gap between the US and Australian markets is a key contributor to piracy early in a film's theatrical life; this finding provides a partial explanation for the industry's move toward coordinated worldwide releases. 2013-07-01T00:00:00Z https://hdl.handle.net/2123/9265 Endogenous time preference: evidence from Australian households' behaviour Dutta, Dilip; Yang, Yibai Recently, the focus has been increasingly on the importance of endogenous time preference and its varying degrees of marginal impatience. Two types of marginal impatience can change the representative household's endogenous discount function: increasing (Koopmans-Uzawa type)and decreasing (Becker-Mulligan type), which are induced by current consumption and the investment on future-oriented capital, respectively. By modifying the endogenous discount factor in a small-open-economy RBC model, the equilibrium levels of the turnover in future-oriented capital and current consumption are obtained in a reduced form, which overcomes the non-stationarity problem. The relation between current consumption and the turnover in future-oriented capital is consistent with the empirical evidence from Australia. 2013-07-01T00:00:00Z https://hdl.handle.net/2123/9259 Savings and Prize-Linked Savings Accounts Atalay, Kadir; Bakhtiar, Fayzan; Cheung, Stephen L.; Slonim, Robert Many households have insufficient savings to handle moderate and routine consumption shocks. Many of these financially-fragile households also have the highest lottery expenditures as a proportion of income. This combination suggests that Prize-Linked Savings (PLS) accounts, combining security of principal with lottery-type jackpots, can increase savings among these at-risk households. Results from an online experiment show that the introduction of PLS accounts increase total savings and reduce lottery expenditures significantly, especially among individuals with the lowest levels of savings and income. The results imply that PLS accounts offer a plausible market-based solution to encourage individuals to increase savings. 2013-06-01T00:00:00Z https://hdl.handle.net/2123/9255 Lying through Their Teeth: Third Party Advice and Truth Telling in a Strategy Proof Mechanism Guillén, Pablo; Hing, Alexander We test the effect of advice on the well known top trading cycles (TTC) matching algorithm in a school choice frame work. We compare three treatments involving third party advice [right advice (R), wrong advice (W), and both right and wrong advice (RW)] to a no-advice baseline (B). In line with previous literature the truth telling rate is higher than 80% in the baseline, but it becomes as low as 35% in the W treatment. Truth telling rates are also significantly lower in R than in B, and much lower in RW than in B. This evidence suggests that a vast majority of participants in our experiment were confused. Truth telling seems to work only as a default strategy, and participants can be heavily influenced by advice. The real life implementation of matching mechanisms may have been misguided by some laboratory experimentation. 2013-07-01T00:00:00Z https://hdl.handle.net/2123/9242 The Price of Luck Bou, Silvia; Brandts, Jordi; Cayón, Magda; Guillén, Pablo We find that the vast majority of students taking an advanced undergraduate finance course show a preference for luck in a classroom experiment. In Phase I of the experiment part of the students, group A, were asked to guess a coin toss five times in a row. In Phase II the rest of the students, group B, were given 10 EUR to bet on some of the Group A students taking a second go at guessing a sequence of five coin tosses (Phase III). Group B students’ bets were by default allocated to the worse performing student in Phase I. Switching to better performing Group A students was costly. A total of 23 out of 28 students were willing to pay for switching and thus showed a preference for luck. 2013-06-01T00:00:00Z