We use an equivalent form of Markowitz's mean-variance utility function, based on Rao's Quadratic Entropy (RQE), to enrich the standard capital asset pricing model (CAPM), both in the presence and in the absence of a risk-free asset. The resulting equilibrium, which we denote RQE-CAPM, offers important new insights about the pricing of risk. Notably, it reveals that the reason for which the standard CAPM does not price idiosyncratic risk is not only because the market portfolio is law of large numbers diversified but also because the model implicitly assumes agents' total risk aversion and their correlation diversification risk preference balance each other exactly. We then demonstrate that idiosyncratic risk is priced in a general RQE-CAPM where agents' total risk aversion and their correlation diversification risk preference coefficients are not necessary equal. Our general RQE-CAPM therefore offers a unifying way of thinking about the pricing of idiosyncratic risk, including cases where such risk is negatively priced, and is relevant for the literature assessing the idiosyncratic risk puzzle. It also provides a natural theoretical underpinning for the empirical tests of the CAPM or the pricing of idiosyncratic risk performed in some existence studies.
 

Why do some societies embrace innovative technologies, policies, and ideas, while others are slow to adopt, or even resist, them? We focus on features of an innovation that are expected to affect the incumbent elite’s economic activities, and hence the elite’s reaction. The elite can choose whether to appropriate the innovation for itself; encourage its adoption; tax, regulate, or limit or block it. Six features of the innovation affect the elite response: i) whether it is easy to replicate; ii) whether it complements or competes with the elite’s sources of income; iii) whether its impact is broad or narrow; iv) whether it is location-dependent, and v) concealable; vi) whether it requires large fixed costs. Some of these factors have been considered in other work; here we assess them together. We provide illustrative evidence of the relevance and generality of the model to understand the fate of a variety of innovations.
 

If individuals tend to behave like their peers, is it because of conformity, that is, the preference of people to align behavior with the behavior of their peers; homophily, that is, the tendency of people to bond with similar others; or both? We address this question in the context of an ethical dilemma. Using a peer effect model allowing for homophily, we designed a real-effort laboratory experiment in which individuals could misreport their performance to earn more. Our results reveal a preference for conformity and for homophily in the selection of peers, but only among participants who were cheating in isolation. The size of peer effects is similar when identical peers were randomly assigned and when they were selected by individuals. We thus jointly reject the presence of a self-selection bias in the peer effect estimates and of a link strength effect.

Punishment causes reputational losses in addition to more tangible losses. Lowering the probability of punishment reduces these reputational losses by diluting the informational value of verdicts. These considerations better align the positive as well as normative implications of law enforcement models with intuition and empirics: Crime is more responsive to the certainty rather than the severity of punishment even absent risk-seeking offenders (positive), which causes extreme Beckerian punishments to be inefficient when sanctions are socially costly to impose (normative). Moreover, in some cases optimal enforcement is 'anti-Beckerian': Punishment is symbolic and detection costs are incurred solely to provide reputational incentives.
 

I present a model of peer effects in which the dependent variable takes integer values. I present an incomplete information game rationalizing the model, and I provide sufficient conditions under which the equilibrium of the game is unique. I estimate the model’s parameters using the Nested Partial Likelihood method. I show that the counting nature of the dependent variable is important and that assuming incorrectly that it is continuous significantly underestimates the peer effects. I estimate peer effects on the the number of extracurricular activities in which students are enrolled. Increasing the number of activities in which friends are enrolled by one implies an increase of 0.295 in the number of activities in which students are enrolled, when controlling for network endogeneity. Ignoring the endogeneity of the network overestimates the peer effects. 
 

This paper constructs a measure of Canadian macroeconomic uncertainty, by applying the Jurado et al. (2015) method to the large database of Fortin-Gagnon et al. (2020). This measure reveals that the COVID-19 pandemic has been associated with a very sharp rise of macroeconomic uncertainty in Canada, confirming other results showing similar big increases in uncertainty in the United States and elsewhere. The paper then uses a structural VAR to compute the impacts on the Canadian economy of uncertainty shocks calibrated to match these recent increases. We show that such shocks lead to severe economic downturns, lower inflation and sizeable accommodating measures from monetary policy. Important distinctions emerge depending on whether the shock is interpreted as originating from US uncertainty –in which case the downturn is deep but relatively short– or from specifically Canadian uncertainty, which leads to shallower but more protracted declines in economic activity. 
 

We propose a model of intergenerational transmission of education wherein children belong to either high-educated or low-educated families. Children choose the intensity of their social activities, while parents decide how much educational effort to exert. We characterize the equilibrium and show the conditions under which cultural substitution or complementarity emerges. Using data on adolescents in the United States, we structurally estimate our model and find that, on average, children’s homophily acts as a complement to the educational effort of high-educated parents but as a substitute for the educational effort of low-educated parents. We also perform some policy simulations. We find that policies that subsidize social interactions can backfire for low-educated students because they tend to increase their interactions with other low-educated students, which reduce the education effort of their parents and, thus, their chance of becoming educated.
 

We study the estimation of peer effects through social networks when researchers do not observe the entire network structure. Special cases include sampled networks, censored networks, misclassified links, and aggregated relational data. We assume that researchers can obtain a consistent estimator of the distribution of the network. We show that this assumption is sufficient for estimating peer effects using a linearin-means model. We provide an empirical application to the study of peer effects on students academic achievement using the widely used Add Health database and show that network data errors have a first-order downward bias on estimated peer effects.
 

The paper investigates the effects of nursing overtime on nosocomial infections and medical accidents in a neonatal intensive care unit (NICU). The literature lacks clear evidence on this issue and we conjecture that this may be due to empirical and methodological factors. We thus focus on a single NICU, thereby removing much variation in specialty mixes such neonatologists, fellows, residents, nurse practitioners that are observed across units. We model the occurrences of both outcomes using a sample of 3,979 neonates which represents over 84,846 observations (infant/days). We use a semiparametric panel data Logit model with random coefficients. The non-parametric components of the model allow to unearth potentially highly non-linear relationships between the outcomes and various policy-relevant covariates. We use the mean field variational Bayes approximation method to estimate the models. Our results show unequivocally that both health outcomes are affected by nursing overtime. Furthermore, they are both highly sensitive to infant and NICU-related characteristics.

This article develops a Bayesian approach for estimating panel quantile regression with binary outcomes in the presence of correlated random effects. We construct a working likelihood using an asymmetric Laplace (AL) error distribution and combine it with suitable prior distributions to obtain the complete joint posterior distribution. For posterior inference, we propose two Markov chain Monte Carlo (MCMC) algorithms but prefer the algorithm that exploits the blocking procedure to produce lower autocorrelation in the MCMC draws. We also explain how to use the MCMC draws to calculate the marginal effects, relative risk and odds ratio. The performance of our preferred algorithm is demonstrated in multiple simulation studies and shown to perform extremely well. Furthermore, we implement the proposed framework to study crime recidivism in Quebec, a Canadian Province, using a novel data from the administrative correctional files. Our results suggest that the recently implemented “tough-on-crime” policy of the Canadian government has been largely successful in reducing the probability of repeat offenses in the post-policy period. Besides, our results support existing findings on crime recidivism and offer new insights at various quantiles.
 

We survey the recent, fast-growing literature on peer effects in networks. An important recurring theme is that the causal identification of peer effects depends on the structure of the network itself. In the absence of correlated effects, the reflection problem is generally solved by network interactions even in non-linear, heterogeneous models. By contrast, microfoundations are generally not identified. We discuss and assess the various approaches developed by economists to account for correlated effects and network endogeneity in particular. We classify these approaches in four broad categories: random peers, random shocks, structural endogeneity and panel data. We review an emerging literature relaxing the assumption that the network is perfectly known. Throughout, we provide a critical reading of the existing literature and identify important gaps and directions for future research.
 

Bertrand, Kamenica, and Pan (2015) show that among married couples in the United States, the distribution of the share of the household income earned by the wife exhibits a sharp drop just to the right of 50%. They argue that this drop is consistent with a gender identity norm prescribing that a husband should earn more than his wife. We investigate this phenomenon in Canada at the national level but also across provinces. First, we document the presence of gender norms in Canada over the 1990-2014 period using three international data sets (the World Value Survey, the European Values Study and the International Social Survey Program). We find that Western Canada is relatively more traditional than Eastern Canada. Then we show that it exists a significant discontinuity at the 50% threshold in the distribution of the wife’s relative income, using the 2006 and 2016 Census data. This discontinuity is larger in Ontario and Western Canada than in Quebec and the Atlantic provinces.
 

In this paper, we model network formation and network interactions under a unified framework. The key feature of our model is to allow individuals to respond to incentives that stem from interaction benefits of certain activities when they choose friends (network links), while capturing homophily in terms of unobserved characteristic variables in network formation and activities. There are two advantages of this modeling approach: first, one can evaluate whether incentives from certain interactions are important factors for friendship formation or not. Second, in addition to homophily effects in terms of unobserved characteristics, inclusion of incentive effects in the network formulation also corrects possible friendship selection bias on activity outcomes under network interactions. A theoretical foundation of this unified model is based on a sub-game perfect equilibrium of a two-stage game. A tractable Bayesian MCMC approach is proposed for the estimation of the model, and we demonstrate its finite sample performance in a simulation study. We apply the model to study empirically American high school students’ friendship networks from the Add Health dataset. We consider two activity variables, GPA and smoking frequency, and find a significant incentive effect from GPA, but not from smoking, on friendship formation. These results suggest that the benefit of interactions in academic learning is an important factor for friendship formation, whereas the interaction benefit of smoking is not. On the other hand, from the perspective of network interactions, both GPA and smoking frequency are subject to significant positive interaction (peer) effects.
 

We consider legal obligations against a background of social norms, e.g., societal norms, professional codes of conduct or business standards. Violations of the law trigger reputational sanctions insofar as they signal non-adherence to underlying norms, raising the issue of the design of offences. When society is only concerned with the trade-off between deterrence and enforcement costs, legal standards defining offences should align on underlying norms so long as the latter are not too deficient. When providing productive information to third parties is also a concern, legal standards should either align on underlying norms with fines that trade off deterrence against the provision of information; or legal standards should be more demanding and enforced with purely symbolic sanctions, e.g., public reprimands. Our analysis has implications for general law enforcement and regulatory policies.

We investigate the returns to college attendance in Canada in terms of health and mortality reduction. To do so, we first use a dynamic health microsimulation model to document how interventions which incentivize college attendance among high school graduates may impact their health trajectory, health care consumption and life expectancy. We find large returns both in terms of longevity (4.1 years additional years at age 51), reduction in the prevalence of various health conditions (10-15 percentage points reduction in diabetes and 5 percentage points for stroke) and health care consumption (27.3% reduction in lifetime hospital stays, 19.7 for specialists). We find that education impacts mortality mostly by delaying the incidence of health conditions as well as providing a survival advantage conditional on having diseases. Second, we provide quasi-experimental evidence on the impact of college attendance on long- term health outcomes by exploiting the Canadian Veteran's Rehabilitation Act, a program targeted towards returning WW-II veterans and which incentivized college attendance. The impact on mortality are found to be larger than those estimated from the health microsimulation model (hazard ratio of 0.216 compared to 0.6 in the simulation model) which suggest substantial returns to college education in terms of healthy life extension which we estimate around one million canadian dollars.

Il est fréquent que de voir des guerres civiles éclater simultanément dans des pays voisins. Ceci tient notamment à ce que ces pays présentent des caractéristiques communes, et aussi à ce qu’une guerre civile favorise l’apparition de conflits dans les pays voisins. La littérature empirique dissocie habituellement ces deux explications. Nous proposons un modèl de la contagion des guerres civiles, qui illustre que certaines caractéristiques des pays sont affectées par le risque de contagion. En particulier, un gouvernement peut éviter la contagion en investissant dans la qualité de ses institutions. La complémentarité stratégique entre les institutions de pays voisins génère des regroupements de pays selon leur capacité étatique. Ceci suggère que les effets de contagion ont pu jusque là être sous-estimés par la littérature empirique.

This paper compares the environments in Bernanke et al. (1999) and Gertler and Karadi (2011), two popular frameworks used to incorporate financial frictions in macroeconomic modelling. We show that the key practical difference between the two frameworks lies in their implications for the link between leverage and expected future spreads of capital returns over safe rates: while the former pairs leverage to one-period-hence such spreads, the latter connects it to a distributed lag of all future spreads. We argue that this difference between the two frameworks is more crucial than the distinction often discussed in the literature, which is related to the specific location of the friction on the borrower-intermediary-entrepreneur financing chain. The paper then compares quantitative versions of the frameworks, estimated using Bayesian procedures and decoupling parameter settings related to steady states from those involving the economy’s dynamic solution around that steady state. We find that when this flexible approach in used, the friction proposed by Gertler and Karadi (2011), which emphasize long-term forward-looking behavior in the leverage equation, is preferred by aggregate data.

This paper assesses the contribution of Canadian and International (US) confidence data, drawn from consumer and business sentiment surveys, for forecasting Canadian GDP growth. The targeting approaches of Bai and Ng (2008) and Bai and Ng (2009) are employed to extract promising predictors from large databases each containing between several dozen and several hundred time series. The databases are categorised between those containing macroeconomic (Canadian and US) and confidence (Canadian and US) data, allowing us to assess the specific value added of international and confidence data. We find that forecasting ability is consistently improved by considering information from national confidence data; by contrast, their US counterparts appear to be helpful only when combined with national time-series. Overall, most relevant gains in forecasting performance are observed for short-term (up to threequarters-ahead) horizons, perhaps reflecting the timing advantage in the releases of sentiment data.

In this paper we analyse the link between homeownership and various aggregate and individual labour market outcomes. Our aim is to investigate the likely consequences of public policies that promote homeownership. To this end, we develop a circular firm-worker matching model with Nash-bargained wage setting and free market entry. Homeowners are assumed to be less mobile than tenants and to bear higher mobility costs. Our numerical exercises show that tenants usually have lower unemployment rates and lower wage rates than homeowners. Importantly, workers’ performances do not necessarily improve following an increase in the proportion of homeowners. The latter crucially depends on the relative utility enjoyed by homeowners and tenants when unemployed. In the aggregate, nevertheless, we find that the unemployment rate generally increases following an increase in the proportion of homeowners. Yet, the link between the two can be reversed if the homeowners’ utility is lower than that of tenants when unemployed. Our model thus identifies a number of conditions under which Oswald’s conjecture is likely to hold or not. Thus, our results do not necessarily support the view that policies fostering homeownership are adequate public policies given their potentially negative effect on the labour market.

Recent advances in the collective model literature suggest ways to estimate the complete allocation of resources within households, using assignable goods and assuming adult preference similarity across demographic groups (or across spouses). While it makes welfare analysis at the individual level possible, the predictive power of the model is unknown. We propose the ?rst validation of this approach, exploiting a unique dataset from Bangladesh in which the detailed expenditure on private goods by each family member is collected. Individualized expenditure allows us to test the identifying assumptions and to derive ?observed?resource sharing within families, which can be compared to the resource allocation predicted by the model. Sharing between parents and children is well predicted on average while the model detects key aspects like the extent of pro-boy discrimination. Results overall depend on the identifying good: clothing provides the best ?t compared to other goods as it best validates the preference-similarity assumption. The model leads to accurate measures of child and adult poverty, indicating the size and direction of the mistakes made when using the traditional approach based on per adult equivalent expenditure (i.e. ignoring within-household inequality). This assessment of existing approaches to measure individual inequality and poverty is crucial for both academic and policy circles and militates in favor of a systematic use of collective models for welfare analyses.

We show how the legal settings of unmarried cohabitation affect partners' labor market outcomes. In Canada, cohabiting couples are automatically entitled to certain rights after a few years of cohabitation. In some provinces, ex-cohabiting partners can claim for alimony upon separation, in others they can claim for an equal split of all the assets acquired during the relationship. As legal settings of unmarried cohabitation differ across time, provinces and duration of the relationship, it provides a unique framework to analyze how different levels of commitment affect couples' decision regarding labor market supply. Using cross-provinces variation in the legal settings and minimum duration for eligibility, we show that unmarried cohabiting men increase their labor force supply when they become eligible to a more committed cohabitation regime, whereas women decrease theirs. Higher levels of commitment induce larger e ects on labor market outcomes.

We examine the different hypotheses which have been put forward to explain the low demand for long-term care insurance using the results from a survey of 2000 Canadians that was conducted in the autumn of 2016. Defining the natural market of long-term care insurance buyers as the one catering to individuals aged between 50 and 70, we find that a remarkable proportion of this natural market has never been approached to purchase such protection. We estimate that approximately 60% of this natural market is currently under-served. After eliminating risk perception and demand side explanations for the low market penetration of long-term care insurance, we conclude that supply-side factors and the crowding-out by government programs are the most likely culprits in explaining the low proportion of Canadians that purchase LTC insurance from private providers.

Collective rationality is seldom if ever rejected in the literature, raising doubt about its falsifiability. We show that the standard approach to test the collective model with distribution factors may yield misleading inference. We develop a new test procedure to assess its validity. Our approach extends to households that potentially include more than two decision-makers (e.g., polygamous households, adult children). We provide a brief and informal meta-analysis that suggests that much of the evidence in favour of collective rationality in the empirical literature appears to be inconsistent with our test. We illustrate the latter using data from a survey we have conducted in Burkina Faso. Collective rationality within monogamous households is not rejected using the standard testing procedure while it is clearly rejected using our proposed test procedure. Furthermore, our test also rejects collective rationality for bigamou households. We conclude that the household efficiency does yield empirically falsifiable restrictions despite being scarcely rejected in the literature.

Immigrants often experience difficulties integrating the local labor market. In Canada, the government of Quebec implemented a program back in 1996 that explicitly selected highly qualified workers (Bachelors’, Masters’ or PhD’s). This paper investigates the extent to which the return to foreign-acquired human capital is different from the education acquired in Quebec. Specifically, we seek to estimate the benefits of post-migration education over foreign-education on the transitions between qualified and unqualified jobs and unemployment by means of a multiple-spells and multiple-states model. Our results indicate that immigrants originating from well-off countries have no need to further invest in domestic education. On the other hand, immigrants from poorer countries, despite being highly qualified, benefit greatly from such training in the long run as it eases their transitions into qualified and unqualified jobs and out of unemployment. Our results also indicate that selection into domestic education needs to be accounted for to avoid significant selection problems.

We investigate the determinants and extent of labor market discrimination toward people with acute physical disabilities (wheelchair users) using data from a large scale field experiment conducted in the province of Quebec (Canada). Applications (cover letters and CVs) were randomly sent to 1477 private firms operating in two urban regions (Montréal and Québec City) advertising open positions requiring various skill levels. The applications were randomly generated to cover a broad spectrum of potential determinants of discrimination (gender, skill level, work history, workplace adjustment costs, etc.). We find that average callback rates of disabled and non-disabled applicants is 14.4% and 31%, respectively, yielding a differential callback rate of 46%. We also investigate whether the differential may result from accessibility constraints related to the physical infrastructures where firms are located (poor and access to an elevator, availability of wheelchair, etc.). The latter are found to have no explanatory power. In addition, applications which explicitly mention that the candidate is eligible to a government subsidy to cover the cost of workplace adaptations and assistive technology do not yield higher callback rates.

I present a behavioural model of network formation with positive network externalities in which individuals have preferences for being part of a clique. The behavioural model leads to an associated supermodular (Topkis, 1979) normalform game. I show that the behavioural model converges to the greatest Nash equilibrium of the associated normal-form game. I propose an approximate Bayesian computation (ABC) framework, using original summary statistics, to make inferences about individuals' preferences, and provide an illustration using data on high school friendships.

Psychological games of guilt aversion assume that preferences depend on (beliefs about) beliefs and on the guilt sensitivity of the decision-maker. We present an experiment designed to measure guilt sensitivities at the individual level for various stake sizes. We use the data to estimate a structural choice model that allows for heterogeneity, and permits that guilt sensitivities depend on stake size. We find substantial heterogeneity of guilt sensitivities in our population, with 60% of decision makers displaying stake-dependent guilt sensitivity. For these decision makers, we find that average guilt sensitivities are significantly different from zero for all stakes considered, while significantly decreasing with the level of stakes.

The paper develops a general Bayesian framework for robust linear static panel data models using ε-contamination. A two-step approach is employed to derive the conditional type-II maximum likelihood (ML-II) posterior distribution of the coeffcients and individual effects. The ML-II posterior densities are weighted averages of the Bayes estimator under a base prior and the data-dependent empirical Bayes estimator. Two-stage and three stage hierarchy estimators are developed and their finite sample performance is investigated through a series of Monte Carlo experiments. These include standard random effects as well as Mundlak-type, Chamberlain-type and Hausman-Taylor-type models. The simulation results underscore the relatively good performance of the three-stage hierarchy estimator. Within a single theoretical framework, our Bayesian approach encompasses a variety of specifications while conventional methods require separate estimators for each case.

This paper compares a clean energy standard (CES) and a carbon tax (CT), using theory and quantitative experiments. A two-stage duopolistic competition in the electricity sector between a polluting plant and its non-polluting rival anchors the model underlying these experiments. The CT induces both plants to contribute to clean electricity, whereas the CES only incentivizes the non-polluting plant. Ultimately, what matters for the ranking of these instruments is the size of the pre-existing competitive gap between the two rival plants. When this gap is sufficiently small, the CES becomes the more cost-effective instrument, irrespective of the pre-specified emissions reduction target.

This paper explores gender peer effects heterogeneity in adolescent Body Mass Index (BMI). We propose a utility-based non-cooperative social network model with effort technology. We allow the gender composition to influence peer effects. We analyze the possibility of recovering the fundamentals of our structural model from the best-response functions. We provide identification conditions of these functions generalizing those of the homogeneous version of the model. Extending Liu and Lee [2010], we consider 2SLS and GMM strategies to estimate our model using Add Health data. We provide tests of homophily in the formation of network and reject them after controlling for network (school) fixed effects. The joint (endogenous plus contextual) gender homogeneous model is rejected. However, we do not reject that the endogenous effects are the same.This suggests that the source of gender peer effects heterogeneity is the contextual effects. We find that peers’ age, parents’ education, health status, and race are relevant for the latter effects and are gender-dependent.

Public policy addressing the harmful practice of adolescent marriage tends to leave out men, as prospective grooms. Using micro-level data from Nigeria in combination with plausible instrumental variables, we find that a male's education significantly decreases the likelihood that he marries an adolescent girl. We show that this negative relationship is not a mere mechanical effect reflecting the endogeneity between schooling and marriage-timing decisions, and that it is stronger where patriarchal gender norms are weaker. We develop a model that explains this causal effect as resulting from the complementarity between father's and mother's education in the production of child quality.

We present a flexible model of wage dynamics where information about job openings is transmitted through social networks. The model is based on Calvò-Armengol & Jackson (2004, 2007) and extends their results outside the stationary distribution, and under observed and unobserved heterogeneity. We present an empirical application using the British Household Panel Survey by exploiting direct information about individual's social networks. We find that having more employed friends leads to more job offers but to lower wages due to higher mismatch. We also find that non-relative friends are more helpful than relatives, and that women benefit relatively more from their male friends.

This paper assesses the contribution of confidence - or sentiment - data in predicting Canadian economic slowdowns. A probit framework is specified and applied to an indicator on the status of the Canadian business cycle produced by the OECD. Explanatory variables include all available Canadian data on sentiment (which arise from four different surveys) as well as various macroeconomic and financial data. The model is estimated via maximum likelihood and sentiment data are introduced either as individual variables, as simple averages (such as confidence indices) and as confidence factors extracted, via principal components' decompositions, from a larger dataset in which all available sentiment data have been collected. Our findings indicate that the full potential of sentiment data for forecasting future business cycles in Canada is attained when all data are used through the use of factor models.

We extend the search-matching model of the marriage market of Shimer and Smith (2000) to allow for labor supply, home production, match-specific shocks and endogenous divorce. We study nonparametric identification using panel data on marital status, education, family values, wages, and market and non market hours, and we develop a semiparametric estimator. We estimate how much sorting results from time use specialization or homophilic preferences. We estimate how equilibrium marriage formation affects the wage elasticities of market and non market hours. We estimate individuals’ willingness to pay for marriage and quantify the redistributive effect of intrahousehold resource sharing.

Pour des CV semblables en tout point, Samira Benounis recevra-t-elle moins dʼinvitations à un entretien dʼembauche que Valérie Tremblay dans la région de la Capitale-Nationale (Québec, Canada) ? Cet article tente de répondre à cette question à partir dʼune expérience utilisant la méthode de testing par envoi de CV. Nos résultats montrent que, toutes choses égales par ailleurs, la probabilité dʼêtre invitée à un entretien dʼembauche diminue de 11 % lorsque la candidate a un nom dʼorigine maghrébine plutôt que québécoise. Ce constat suggère la présence dʼune discrimination à lʼembauche des candidates dʼorigine maghrébine dans la région de la Capitale-Nationale.

Sequential Monte Carlo (SMC) methods are widely used for non-linear filtering purposes. Nevertheless the SMC scope encompasses wider applications such as estimating static model parameters so much that it is becoming a serious alternative to Markov-Chain Monte-Carlo (MCMC) methods. Not only SMC algorithms draw posterior distributions of static or dynamic parameters but additionally provide an estimate of the marginal likelihood. The tempered and time (TNT) algorithm, developed in the paper, combines (off-line) tempered SMC inference with on-line SMC inference for drawing realizations from many sequential posterior distributions without experiencing a particle degeneracy problem. Furthermore, it introduces a new MCMC rejuvenation step that is generic, automated and well-suited for multi-modal distributions. As this update relies on the wide heuristic optimization literature, numerous extensions are already available. The algorithm is notably appropriate for estimating Change-point models. As an example, we compare Change-point GARCH models through their marginal likelihoods over time.

This paper assesses the impact that a widely-based Securities Transaction Tax (STT) could have on the likelihood of systemic financial crises. We apply the methodology developed by Demirgüç-Kunt and Detragiache (1998) [IMF Staff Papers 45 (1)] to a panel dataset of 34 OECD countries for the sample 1973 – 2012, using a measure of a country’s average bid-ask spread in financial markets as a proxy for the likely effect of a STT on transactions costs. Our results indicate that the establishment of a STT could sizeably increase the risk of financial crises.

In the context of polarized societies, income homogeneity is linked to the frequency andthe intensity of social unrest. Most homogenous countries exhibit a lower frequency of intense social conflicts and less homogeneous countries show a higher frequency of moderate social conflicts. This paper develops a methodology to compare the degree of homogeneity of two income distributions. We use for that purpose and index of polarization that does not account for alienation. This index is the identification component of polarization that measures the degree to which individuals feel alike in an income distribution. This development leads to identification dominance curves and derives first-order and higher-order stochastic dominance conditions. First-order stochastic dominance is performed through identification dominance curves drawn on a support of identification thresholds. These curves are used to determine whether identification, homogeneity, or similarity of individuals is greater in one distribution than in another for general classes of polarization indices and ranges of possible identification thresholds. We also derive the asymptotic sampling distribution of identification dominance curves and test dominance between two distributions using Intersection Union tests and bootstrapped p-values. Our methodology is illustrated by comparing pairs of distributions of eleven countries drawn from the Luxembourg Income Study database.

This paper extends the use of Rao(1982b)’s Quadratic Entropy (RQE) to modern portfolio theory. It argues that the RQE of a portfolio is a valid, flexible and unifying approach to measuring portfolio diversification. The paper demonstrates that portfolio’s RQE can encompass most existing measures, such as the portfolio variance, the diversification ratio, the normalized portfolio variance, the diversification return or excess growth rates, the Gini-Simpson indices, the return gaps, Markowitz’s utility function and Bouchaud’s general free utility. The paper also shows that assets selected under RQE can protect portfolios from mass destruction (systemic risk) and an empirical illustration suggests that this protection is substantial.

We assess whether global social welfare has improved in the last decades despite (or because of) the substantial increase in global population. We use for this purpose a relatively unknown but simple and attractive social evaluation approach called criticallevel generalized utilitarianism (CLGU). CLGU posits that social welfare increases with population size if and only if the new lives come with a level of living standards higher than that of a critical level. Despite its attractiveness, CLGU poses a number of practical difficulties that may explain why the literature has left it largely unexplored. We address these difficulties by developing new procedures for making partial CLGU orderings. The headline result is that we can robustly conclude that world welfare has increased between 1990 and 2005 if we judge that lives with per capita yearly consumption of more than $1,248 necessarily increase social welfare; the same conclusion applies to Sub-Saharan Africa if and only if we are willing to make that same judgement for lives with any level of per capita yearly consumption above $147. Otherwise, some of the admissible CLGU functions will judge the last two decades’ increase in global population size to have lowered global social welfare.

I present a model of conformism in social networks that incorporates both peer effects and self-selection. I find that equilibrium behaviors are linked through the Laplacian matrix of the equilibrium network. I show that conformism has positive social value and that social welfare can be bounded by network centrality and connectivity measures. I apply the model using empirical data on high school student participation in extracurricular activities. I find that the local effects of conformism (i.e. endogenous peer effect for a fixed network structure) range from 7.5% to 45%, depending on the number of peers that an individual has. Simulations show that the optimal policies of an inequality-averse policy-maker change in relation to the size of a school. Small schools should encourage shy students to integrate more with other students, while large schools should focus on promoting role models within the school.