Project acronym APMPAL
Project Asset Prices and Macro Policy when Agents Learn
Researcher (PI) Albert Marcet Torrens
Host Institution (HI) FUNDACIÓ MARKETS, ORGANIZATIONS AND VOTES IN ECONOMICS
Call Details Advanced Grant (AdG), SH1, ERC-2012-ADG_20120411
Summary "A conventional assumption in dynamic models is that agents form their expectations in a very sophisticated manner. In particular, that they have Rational Expectations (RE). We develop some tools to relax this assumption while retaining fully optimal behaviour by agents. We study implications for asset pricing and macro policy.
We assume that agents have a consistent set of beliefs that is close, but not equal, to RE. Agents are ""Internally Rational"", that is, they behave rationally given their system of beliefs. Thus, it is conceptually a small deviation from RE. It provides microfoundations for models of adaptive learning, since the learning algorithm is determined by agents’ optimal behaviour. In previous work we have shown that this framework can match stock price and housing price fluctuations, and that policy implications are quite different.
In this project we intend to: i) develop further the foundations of internally rational (IR) learning, ii) apply this to explain observed asset price price behavior, such as stock prices, bond prices, inflation, commodity derivatives, and exchange rates, iii) extend the IR framework to the case when agents entertain various models, iv) optimal policy under IR learning and under private information when some hidden shocks are not revealed ex-post. Along the way we will address policy issues such as: effects of creating derivative markets, sovereign spread as a signal of sovereign default risk, tests of fiscal sustainability, fiscal policy when agents learn, monetary policy (more specifically, QE measures and interest rate policy), and the role of credibility in macro policy."
Summary
"A conventional assumption in dynamic models is that agents form their expectations in a very sophisticated manner. In particular, that they have Rational Expectations (RE). We develop some tools to relax this assumption while retaining fully optimal behaviour by agents. We study implications for asset pricing and macro policy.
We assume that agents have a consistent set of beliefs that is close, but not equal, to RE. Agents are ""Internally Rational"", that is, they behave rationally given their system of beliefs. Thus, it is conceptually a small deviation from RE. It provides microfoundations for models of adaptive learning, since the learning algorithm is determined by agents’ optimal behaviour. In previous work we have shown that this framework can match stock price and housing price fluctuations, and that policy implications are quite different.
In this project we intend to: i) develop further the foundations of internally rational (IR) learning, ii) apply this to explain observed asset price price behavior, such as stock prices, bond prices, inflation, commodity derivatives, and exchange rates, iii) extend the IR framework to the case when agents entertain various models, iv) optimal policy under IR learning and under private information when some hidden shocks are not revealed ex-post. Along the way we will address policy issues such as: effects of creating derivative markets, sovereign spread as a signal of sovereign default risk, tests of fiscal sustainability, fiscal policy when agents learn, monetary policy (more specifically, QE measures and interest rate policy), and the role of credibility in macro policy."
Max ERC Funding
1 970 260 €
Duration
Start date: 2013-06-01, End date: 2018-08-31
Project acronym BESTDECISION
Project "Behavioural Economics and Strategic Decision Making: Theory, Empirics, and Experiments"
Researcher (PI) Vincent Paul Crawford
Host Institution (HI) THE CHANCELLOR, MASTERS AND SCHOLARS OF THE UNIVERSITY OF OXFORD
Call Details Advanced Grant (AdG), SH1, ERC-2013-ADG
Summary "I will study questions of central microeconomic importance via interwoven theoretical, empirical, and experimental analyses, from a behavioural perspective combining standard methods with assumptions that better reflect evidence on behaviour and psychological insights. The contributions of behavioural economics have been widely recognized, but the benefits of its insights are far from fully realized. I propose four lines of inquiry that focus on how institutions interact with cognition and behaviour, chosen for their potential to reshape our understanding of important questions and their synergies across lines.
The first line will study nonparametric identification and estimation of reference-dependent versions of the standard microeconomic model of consumer demand or labour supply, the subject of hundreds of empirical studies and perhaps the single most important model in microeconomics. It will allow such studies to consider relevant behavioural factors without imposing structural assumptions as in previous work.
The second line will analyze history-dependent learning in financial crises theoretically and experimentally, with the goal of quantifying how market structure influences the likelihood of a crisis.
The third line will study strategic thinking experimentally, using a powerful new design that links subjects’ searches for hidden payoff information (“eye-movements”) much more directly to thinking.
The fourth line will significantly advance Myerson and Satterthwaite’s analyses of optimal design of bargaining rules and auctions, which first went beyond the analysis of given institutions to study what is possible by designing new institutions, replacing their equilibrium assumption with a nonequilibrium model that is well supported by experiments.
The synergies among these four lines’ theoretical analyses, empirical methods, and data analyses will accelerate progress on each line well beyond what would be possible in a piecemeal approach."
Summary
"I will study questions of central microeconomic importance via interwoven theoretical, empirical, and experimental analyses, from a behavioural perspective combining standard methods with assumptions that better reflect evidence on behaviour and psychological insights. The contributions of behavioural economics have been widely recognized, but the benefits of its insights are far from fully realized. I propose four lines of inquiry that focus on how institutions interact with cognition and behaviour, chosen for their potential to reshape our understanding of important questions and their synergies across lines.
The first line will study nonparametric identification and estimation of reference-dependent versions of the standard microeconomic model of consumer demand or labour supply, the subject of hundreds of empirical studies and perhaps the single most important model in microeconomics. It will allow such studies to consider relevant behavioural factors without imposing structural assumptions as in previous work.
The second line will analyze history-dependent learning in financial crises theoretically and experimentally, with the goal of quantifying how market structure influences the likelihood of a crisis.
The third line will study strategic thinking experimentally, using a powerful new design that links subjects’ searches for hidden payoff information (“eye-movements”) much more directly to thinking.
The fourth line will significantly advance Myerson and Satterthwaite’s analyses of optimal design of bargaining rules and auctions, which first went beyond the analysis of given institutions to study what is possible by designing new institutions, replacing their equilibrium assumption with a nonequilibrium model that is well supported by experiments.
The synergies among these four lines’ theoretical analyses, empirical methods, and data analyses will accelerate progress on each line well beyond what would be possible in a piecemeal approach."
Max ERC Funding
1 985 373 €
Duration
Start date: 2014-04-01, End date: 2019-03-31
Project acronym BUBPOL
Project Monetary Policy and Asset Price Bubbles
Researcher (PI) Jordi Galí Garreta
Host Institution (HI) Centre de Recerca en Economia Internacional (CREI)
Call Details Advanced Grant (AdG), SH1, ERC-2013-ADG
Summary "The proposed research project seeks to further our understanding on two important questions for the design of monetary policy:
(a) What are the effects of monetary policy interventions on asset price bubbles?
(b) How should monetary policy be conducted in the presence of asset price bubbles?
The first part of the project will focus on the development of a theoretical framework that can be used to analyze rigorously the implications of alternative monetary policy rules in the presence of asset price bubbles, and to characterize the optimal monetary policy. In particular, I plan to use such a framework to assess the merits of a “leaning against the wind” strategy, which calls for a systematic rise in interest rates in response to the development of a bubble.
The second part of the project will seek to produce evidence, both empirical and experimental, regarding the effects of monetary policy on asset price bubbles. The empirical evidence will seek to identify and estimate the sign and response of asset price bubbles to interest rate changes, exploiting the potential differences in the joint behavior of interest rates and asset prices during “bubbly” episodes, in comparison to “normal” times. In addition, I plan to conduct some lab experiments in order to shed some light on the link between monetary policy and bubbles. Participants will trade two assets, a one-period riskless asset and a long-lived stock, in an environment consistent with the existence of asset price bubbles in equilibrium. Monetary policy interventions will take the form of changes in the short-term interest rate, engineered by the experimenter. The experiments will allow us to evaluate some of the predictions of the theoretical models regarding the impact of monetary policy on the dynamics of bubbles, as well as the effectiveness of “leaning against the wind” policies."
Summary
"The proposed research project seeks to further our understanding on two important questions for the design of monetary policy:
(a) What are the effects of monetary policy interventions on asset price bubbles?
(b) How should monetary policy be conducted in the presence of asset price bubbles?
The first part of the project will focus on the development of a theoretical framework that can be used to analyze rigorously the implications of alternative monetary policy rules in the presence of asset price bubbles, and to characterize the optimal monetary policy. In particular, I plan to use such a framework to assess the merits of a “leaning against the wind” strategy, which calls for a systematic rise in interest rates in response to the development of a bubble.
The second part of the project will seek to produce evidence, both empirical and experimental, regarding the effects of monetary policy on asset price bubbles. The empirical evidence will seek to identify and estimate the sign and response of asset price bubbles to interest rate changes, exploiting the potential differences in the joint behavior of interest rates and asset prices during “bubbly” episodes, in comparison to “normal” times. In addition, I plan to conduct some lab experiments in order to shed some light on the link between monetary policy and bubbles. Participants will trade two assets, a one-period riskless asset and a long-lived stock, in an environment consistent with the existence of asset price bubbles in equilibrium. Monetary policy interventions will take the form of changes in the short-term interest rate, engineered by the experimenter. The experiments will allow us to evaluate some of the predictions of the theoretical models regarding the impact of monetary policy on the dynamics of bubbles, as well as the effectiveness of “leaning against the wind” policies."
Max ERC Funding
799 200 €
Duration
Start date: 2014-01-01, End date: 2017-12-31
Project acronym DMEA
Project The Dynamics of Migration and Economic Adjustment
Researcher (PI) Christian Dustmann
Host Institution (HI) UNIVERSITY COLLEGE LONDON
Call Details Advanced Grant (AdG), SH1, ERC-2012-ADG_20120411
Summary The research proposed here is concerned with the dynamics of immigrant impacts and the process of economic adaptation in receiving societies. The immigration process is inherently dynamic: many new immigrants return home within a short time; and those that remain undergo a long term series of investments and behavioural changes that gradually alter the way that they interact with the economy of the receiving country. Moreover, in the longer run the presence of immigrants affects the choices of firms over new technology investments, and the choices of native workers over schooling and occupations. Thus simple static frameworks provide an incomplete and even potentially misleading perspective for understanding modern immigration patterns. The point of departure for this proposed research is the recognition that we need to reformulate the analysis of immigrant impacts in a fully dynamic framework, acknowledging the inter-temporal choices of immigrants, firms, and native workers and the ways that these three groups of agents interact over a longer horizon. Our approach involves treating immigration as a dynamic shock, where the dynamics relates to the different agents involved: immigrants, who change their position in the native skill distribution over time as a result of their life-cycle decisions; firms, who react by adjusting their technologies, product mix, and their involvement with institutions and regulatory environment; and native workers, who adjust by changing their career plans. Our work will combine highly innovative theoretical perspectives with state-of-the-art empirical analyses exploiting unique policy experiments and exceptional data sources, merging longitudinal administrative population data with data from firm and individual surveys. This agenda will enable us to construct a comprehensive picture of the adjustment process in response to immigration and open new horizons for future research on the impact of immigration in a dynamic framework.
Summary
The research proposed here is concerned with the dynamics of immigrant impacts and the process of economic adaptation in receiving societies. The immigration process is inherently dynamic: many new immigrants return home within a short time; and those that remain undergo a long term series of investments and behavioural changes that gradually alter the way that they interact with the economy of the receiving country. Moreover, in the longer run the presence of immigrants affects the choices of firms over new technology investments, and the choices of native workers over schooling and occupations. Thus simple static frameworks provide an incomplete and even potentially misleading perspective for understanding modern immigration patterns. The point of departure for this proposed research is the recognition that we need to reformulate the analysis of immigrant impacts in a fully dynamic framework, acknowledging the inter-temporal choices of immigrants, firms, and native workers and the ways that these three groups of agents interact over a longer horizon. Our approach involves treating immigration as a dynamic shock, where the dynamics relates to the different agents involved: immigrants, who change their position in the native skill distribution over time as a result of their life-cycle decisions; firms, who react by adjusting their technologies, product mix, and their involvement with institutions and regulatory environment; and native workers, who adjust by changing their career plans. Our work will combine highly innovative theoretical perspectives with state-of-the-art empirical analyses exploiting unique policy experiments and exceptional data sources, merging longitudinal administrative population data with data from firm and individual surveys. This agenda will enable us to construct a comprehensive picture of the adjustment process in response to immigration and open new horizons for future research on the impact of immigration in a dynamic framework.
Max ERC Funding
1 129 428 €
Duration
Start date: 2013-06-01, End date: 2018-05-31
Project acronym EMF-FEIM
Project Empirical Macro-Finance and the Financial Economics of Insurance Markets
Researcher (PI) Ralph Koijen
Host Institution (HI) LONDON BUSINESS SCHOOL
Call Details Starting Grant (StG), SH1, ERC-2013-StG
Summary "My project consists of two lines of work. 1.Empirical Macro-Finance: Asset prices are informative about the macro-economic risks that matter to investors and about the welfare costs of economic fluctuations. However, recent empirical evidence suggests that leading asset pricing models cannot explain how risks are priced across maturities in equity markets, which is a key input to measuring the costs of business cycles. An analysis of what leading models miss will vastly improve our understanding of how the real economy and asset prices are related. Also, by expanding our empirical evidence about the term structure of equity to the firm-level, I plan to study how investment decisions relate to asset prices. My goal is to measure the firms' incentives to invest and how this impacts economic growth more broadly.
2.Financial Economics of Insurance Markets: Households in Europe and the US can choose from a wide variety of insurance products that insure health and mortality risks. Choosing between these products is no easy task and the costs from sub-optimal insurance choices are estimated to be large. My plan is to develop a comprehensive life-cycle theory of insurance choice that accounts for family structure, risk factors such as labor income and housing, and different institutional settings across countries. I also plan to study the supply side of insurance markets. The traditional view is that insurance prices are driven by life-cycle demand or informational frictions. However, as is clear from evidence during the financial crisis, insurance companies are in fact financial institutions. If financial constraints bind, it may affect insurance prices and ultimately consumers' welfare. My goal is to understand how financial frictions affect insurance companies. A policy implication of my research may be that the private supply of insurance is an imperfect substitute for public supply as insurance companies face different incentives and constraints than the government."
Summary
"My project consists of two lines of work. 1.Empirical Macro-Finance: Asset prices are informative about the macro-economic risks that matter to investors and about the welfare costs of economic fluctuations. However, recent empirical evidence suggests that leading asset pricing models cannot explain how risks are priced across maturities in equity markets, which is a key input to measuring the costs of business cycles. An analysis of what leading models miss will vastly improve our understanding of how the real economy and asset prices are related. Also, by expanding our empirical evidence about the term structure of equity to the firm-level, I plan to study how investment decisions relate to asset prices. My goal is to measure the firms' incentives to invest and how this impacts economic growth more broadly.
2.Financial Economics of Insurance Markets: Households in Europe and the US can choose from a wide variety of insurance products that insure health and mortality risks. Choosing between these products is no easy task and the costs from sub-optimal insurance choices are estimated to be large. My plan is to develop a comprehensive life-cycle theory of insurance choice that accounts for family structure, risk factors such as labor income and housing, and different institutional settings across countries. I also plan to study the supply side of insurance markets. The traditional view is that insurance prices are driven by life-cycle demand or informational frictions. However, as is clear from evidence during the financial crisis, insurance companies are in fact financial institutions. If financial constraints bind, it may affect insurance prices and ultimately consumers' welfare. My goal is to understand how financial frictions affect insurance companies. A policy implication of my research may be that the private supply of insurance is an imperfect substitute for public supply as insurance companies face different incentives and constraints than the government."
Max ERC Funding
1 077 765 €
Duration
Start date: 2013-10-01, End date: 2018-09-30
Project acronym Forecasting
Project New Methods and Applications for Forecast Evaluation
Researcher (PI) Barbara Rossi
Host Institution (HI) UNIVERSIDAD POMPEU FABRA
Call Details Consolidator Grant (CoG), SH1, ERC-2013-CoG
Summary Forecasting is a fundamental tool in Economics, Statistics, Business and other sciences. Judging whether forecasts are good and robust is of great importance since forecasts are used everyday to guide policymakers' and practitioners' decisions. The proposal aims at addressing four important issues that researchers encounter in practice.
A first issue is how to assess whether forecasts are optimal in the presence of instabilities. Optimality is an important property of models’ forecasts: if forecasts are not optimal, then the model can be improved. Existing methods to assess forecast optimality are not robust to the presence of instabilities, which are widespread in the data. How to obtain such robust methods and what they tell us about widely used economic models’ forecasts is the first task of this project.
A second problem faced by forecasters in practice is to evaluate density forecasts. Density forecasts are important tools for policymakers since they quantify uncertainty around forecasts. However, existing methodologies focus on a null hypothesis that is not necessarily the one of interest to the forecaster. The second task is to develop tests for forecast density evaluation that address forecasters’ needs.
A third, important question is “Why Do We Use Forecast Tests To Evaluate Models’ Performance?”. The third task of this project is to understand the relationship between traditional in-sample and forecast evaluation tests, and develop a framework that helps to understand under which circumstances forecast tests are more useful than typical in-sample tests.
A final question is how researchers can improve models that do not forecast well. Model misspecification is widespread, still economists are often left wondering exactly which parts of their models are misspecified. The fourth task is to propose an empirical framework for addressing this issue. By estimating time-varying wedges, we assess where misspecification is located, and how important it is.
Summary
Forecasting is a fundamental tool in Economics, Statistics, Business and other sciences. Judging whether forecasts are good and robust is of great importance since forecasts are used everyday to guide policymakers' and practitioners' decisions. The proposal aims at addressing four important issues that researchers encounter in practice.
A first issue is how to assess whether forecasts are optimal in the presence of instabilities. Optimality is an important property of models’ forecasts: if forecasts are not optimal, then the model can be improved. Existing methods to assess forecast optimality are not robust to the presence of instabilities, which are widespread in the data. How to obtain such robust methods and what they tell us about widely used economic models’ forecasts is the first task of this project.
A second problem faced by forecasters in practice is to evaluate density forecasts. Density forecasts are important tools for policymakers since they quantify uncertainty around forecasts. However, existing methodologies focus on a null hypothesis that is not necessarily the one of interest to the forecaster. The second task is to develop tests for forecast density evaluation that address forecasters’ needs.
A third, important question is “Why Do We Use Forecast Tests To Evaluate Models’ Performance?”. The third task of this project is to understand the relationship between traditional in-sample and forecast evaluation tests, and develop a framework that helps to understand under which circumstances forecast tests are more useful than typical in-sample tests.
A final question is how researchers can improve models that do not forecast well. Model misspecification is widespread, still economists are often left wondering exactly which parts of their models are misspecified. The fourth task is to propose an empirical framework for addressing this issue. By estimating time-varying wedges, we assess where misspecification is located, and how important it is.
Max ERC Funding
501 860 €
Duration
Start date: 2014-07-01, End date: 2019-06-30
Project acronym FRICTIONS
Project Financial Frictions
Researcher (PI) Lasse Heje Pedersen
Host Institution (HI) COPENHAGEN BUSINESS SCHOOL
Call Details Starting Grant (StG), SH1, ERC-2012-StG_20111124
Summary "Financial economics is at a crossroads: Academics are struggling to redefine the theory of finance and practitioners and regulators to restructure the financial industry. The current financial crisis will have significant impact on how we regulate financial markets and how we manage risk in companies and financial institutions. It will continue to inspire an intense discussion and research agenda over the next decade in academics, in industry, and among financial regulators and a central focus will be the role of frictions in financial markets. Nowhere are these issues more pertinent than in Europe right now.
To take up the challenge presented by this crossroad of financial economics, my research project seeks to contribute to the knowledge of financial frictions and what to do about them. FRICTIONS will explore how financial frictions affect asset prices and the economy, and the implications of frictions for financial risk management, the optimal regulation, and the conduct of monetary policy.
Whereas economists have traditionally focused on the assumption of perfect markets, a growing body of evidence is leading to a widespread recognition that markets are plagued by significant financial frictions. FRICTIONS will model key financial frictions such as leverage constraints, margin requirements, transaction costs, liquidity risk, and short sale constraints. The objective is to develop theories of the origins of these frictions, study how these frictions change over time and across markets, and, importantly, how they affect the required return on assets and the economy.
The project will test these theories using data from global equity, bond, and derivative markets. In particular, the project will measure these frictions empirically and study the empirical effect of frictions on asset returns and economic dynamics. The end result is an empirically-validated model of economic behavior subject to financial frictions that yields qualitative and quantitative insights."
Summary
"Financial economics is at a crossroads: Academics are struggling to redefine the theory of finance and practitioners and regulators to restructure the financial industry. The current financial crisis will have significant impact on how we regulate financial markets and how we manage risk in companies and financial institutions. It will continue to inspire an intense discussion and research agenda over the next decade in academics, in industry, and among financial regulators and a central focus will be the role of frictions in financial markets. Nowhere are these issues more pertinent than in Europe right now.
To take up the challenge presented by this crossroad of financial economics, my research project seeks to contribute to the knowledge of financial frictions and what to do about them. FRICTIONS will explore how financial frictions affect asset prices and the economy, and the implications of frictions for financial risk management, the optimal regulation, and the conduct of monetary policy.
Whereas economists have traditionally focused on the assumption of perfect markets, a growing body of evidence is leading to a widespread recognition that markets are plagued by significant financial frictions. FRICTIONS will model key financial frictions such as leverage constraints, margin requirements, transaction costs, liquidity risk, and short sale constraints. The objective is to develop theories of the origins of these frictions, study how these frictions change over time and across markets, and, importantly, how they affect the required return on assets and the economy.
The project will test these theories using data from global equity, bond, and derivative markets. In particular, the project will measure these frictions empirically and study the empirical effect of frictions on asset returns and economic dynamics. The end result is an empirically-validated model of economic behavior subject to financial frictions that yields qualitative and quantitative insights."
Max ERC Funding
1 307 160 €
Duration
Start date: 2013-01-01, End date: 2017-12-31
Project acronym FRICTIONS
Project Frictions in the Financial System
Researcher (PI) Péter Kondor
Host Institution (HI) LONDON SCHOOL OF ECONOMICS AND POLITICAL SCIENCE
Call Details Starting Grant (StG), SH1, ERC-2013-StG
Summary "The financial crisis, since its start in 2008 has exposed enormous fractures both in the financial architecture and in the structure of the global economy. Although with some notable exceptions, the magnitude of the events caught the finance profession largely by surprise. Clearly, we have to understand better the institutional mechanism channeling savings towards the best uses of capital, and to what extent this mechanism can sometimes fail. The projects in this proposal will push the boundaries of our knowledge in this direction.
I suggest a dual approach to achieve this goal. First, we have to improve our understanding of which frictions are the crucial impediments of the efficient functioning of markets. As this approach focuses on particular markets in isolation, I call this the micro approach. I propose three projects within this approach: trading and information diffusion in OTC markets, the crowdedness in limits-to-arbitrage, and the interaction of political uncertainty and sovereign bond prices.
Second, from the frictions emerging from the micro approach, we have to select the ones which determine the aggregate liquidity fluctuations in the economy. I use this concept in a broad sense; referring to the changing efficiency with which the financial system allocates resources across investment opportunities. As this approach focuses on the functionality of the financial system as a whole, I call this the macro approach. I propose two projects within this approach. The first project focuses on the determinants of the differences in the financial architecture of different economies. It builds a novel framework to study the dynamics of the financial sector of an economy. The second project studies the role of shadow banking in the fluctuation of aggregate liquidity. In particular, this project concentrates on the fluctuation of the efficiency of private liquidity creation as the state of the economy changes."
Summary
"The financial crisis, since its start in 2008 has exposed enormous fractures both in the financial architecture and in the structure of the global economy. Although with some notable exceptions, the magnitude of the events caught the finance profession largely by surprise. Clearly, we have to understand better the institutional mechanism channeling savings towards the best uses of capital, and to what extent this mechanism can sometimes fail. The projects in this proposal will push the boundaries of our knowledge in this direction.
I suggest a dual approach to achieve this goal. First, we have to improve our understanding of which frictions are the crucial impediments of the efficient functioning of markets. As this approach focuses on particular markets in isolation, I call this the micro approach. I propose three projects within this approach: trading and information diffusion in OTC markets, the crowdedness in limits-to-arbitrage, and the interaction of political uncertainty and sovereign bond prices.
Second, from the frictions emerging from the micro approach, we have to select the ones which determine the aggregate liquidity fluctuations in the economy. I use this concept in a broad sense; referring to the changing efficiency with which the financial system allocates resources across investment opportunities. As this approach focuses on the functionality of the financial system as a whole, I call this the macro approach. I propose two projects within this approach. The first project focuses on the determinants of the differences in the financial architecture of different economies. It builds a novel framework to study the dynamics of the financial sector of an economy. The second project studies the role of shadow banking in the fluctuation of aggregate liquidity. In particular, this project concentrates on the fluctuation of the efficiency of private liquidity creation as the state of the economy changes."
Max ERC Funding
1 122 883 €
Duration
Start date: 2013-12-01, End date: 2018-11-30
Project acronym HISKNOWL
Project Using Historical Quasi-Experiments to Understand the Knowledge Economy
Researcher (PI) Fabian Waldinger
Host Institution (HI) LONDON SCHOOL OF ECONOMICS AND POLITICAL SCIENCE
Call Details Starting Grant (StG), SH1, ERC-2013-StG
Summary This proposal covers three research strands at the intersection of innovation economics, economic history, and labour economics.
In project A I will investigate how the number of entrepreneurs at the city level affects city growth. As the number of entrepreneurs in a city is likely to be endogenous I identify the causal effect of entrepreneurs using the exodus of Jewish entrepreneurs from German cities during the Nazi era. As different German cities were affected to varying extents by the exodus of Jewish entrepreneurs I can investigate how entrepreneurs affect local GDP and employment in the long-run. Furthermore, I will analyse which types of entrepreneurs matter (e.g. bankers versus manufacturers) because different cities lost Jewish entrepreneurs in different professions.
In project B we will analyse how increases in the availability of secondary schools in Germany affect the number of talented people (such as scientists, parliamentarians or entrepreneurs) who originate from certain cities. To analyse the causal effect of secondary school availability we study large expansions in the number of schools in Germany that lowered the cost of attending an academic-track school for children in some locations, in particular for students in rural areas. Furthermore, we will investigate how the school curriculum and how single-sex versus mixed-sex education affect the production of talent.
In project C we investigate the role of open science for the accumulation of knowledge. To investigate the causal effect of open science on the productivity of scientists we will investigate the exclusion of scientists from the losing Central Powers (e.g. Germany) from the international scientific community after WWI. As the exclusion affected scientists in different scientific fields and countries very differently we can identify the role of open science for the number of published articles by a certain scientist and how quickly she cites important work by foreign scientists.
Summary
This proposal covers three research strands at the intersection of innovation economics, economic history, and labour economics.
In project A I will investigate how the number of entrepreneurs at the city level affects city growth. As the number of entrepreneurs in a city is likely to be endogenous I identify the causal effect of entrepreneurs using the exodus of Jewish entrepreneurs from German cities during the Nazi era. As different German cities were affected to varying extents by the exodus of Jewish entrepreneurs I can investigate how entrepreneurs affect local GDP and employment in the long-run. Furthermore, I will analyse which types of entrepreneurs matter (e.g. bankers versus manufacturers) because different cities lost Jewish entrepreneurs in different professions.
In project B we will analyse how increases in the availability of secondary schools in Germany affect the number of talented people (such as scientists, parliamentarians or entrepreneurs) who originate from certain cities. To analyse the causal effect of secondary school availability we study large expansions in the number of schools in Germany that lowered the cost of attending an academic-track school for children in some locations, in particular for students in rural areas. Furthermore, we will investigate how the school curriculum and how single-sex versus mixed-sex education affect the production of talent.
In project C we investigate the role of open science for the accumulation of knowledge. To investigate the causal effect of open science on the productivity of scientists we will investigate the exclusion of scientists from the losing Central Powers (e.g. Germany) from the international scientific community after WWI. As the exclusion affected scientists in different scientific fields and countries very differently we can identify the role of open science for the number of published articles by a certain scientist and how quickly she cites important work by foreign scientists.
Max ERC Funding
733 621 €
Duration
Start date: 2013-11-01, End date: 2018-09-30
Project acronym Identification
Project Identification, Estimation and Implementation of Structural Economic Models
Researcher (PI) Dennis Kristensen
Host Institution (HI) UNIVERSITY COLLEGE LONDON
Call Details Starting Grant (StG), SH1, ERC-2012-StG_20111124
Summary Structural economic models are getting increasingly complex. This complicates their implementation. In particular, for many models, (i) identification of the relevant components from data is still unresolved; (ii) estimation and testing procedures tend to be somewhat ad hoc and with no theoretical underpinning; (iii) the implementation of model and estimators often require numerical approximations since model solutions are not available on closed form.
The proposed research aims at addressing these three issues, (i)-(iii), by developing new methods and results for identification, estimation, testing and implementation of structural models. Particular emphasis is put on the use of nonparametric techniques. Many of the projects involve empirical applications where the proposed methods will be taken to data.
The individual projects making up the proposal are: Identification and inference in discrete choice models; identification and inference in continuous choice models; Implementation and estimation of parametric structural models; Filtering and likelihood inference in dynamic latent variable models; Bandwidth selection in estimation and testing of non- and semiparametric models.
Summary
Structural economic models are getting increasingly complex. This complicates their implementation. In particular, for many models, (i) identification of the relevant components from data is still unresolved; (ii) estimation and testing procedures tend to be somewhat ad hoc and with no theoretical underpinning; (iii) the implementation of model and estimators often require numerical approximations since model solutions are not available on closed form.
The proposed research aims at addressing these three issues, (i)-(iii), by developing new methods and results for identification, estimation, testing and implementation of structural models. Particular emphasis is put on the use of nonparametric techniques. Many of the projects involve empirical applications where the proposed methods will be taken to data.
The individual projects making up the proposal are: Identification and inference in discrete choice models; identification and inference in continuous choice models; Implementation and estimation of parametric structural models; Filtering and likelihood inference in dynamic latent variable models; Bandwidth selection in estimation and testing of non- and semiparametric models.
Max ERC Funding
1 067 000 €
Duration
Start date: 2012-10-01, End date: 2017-09-30
