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A Robust Test for Weak Instruments for 2SLS with Multiple Endogenous Regressors

Daniel J. Lewis and Karel Mertens

We develop a test for instrument strength based on the bias of two-stage least squares (2SLS) that (1) generalizes the tests of Stock and Yogo (2005) and Sanderson and Windmeijer (2016) to be robust to heteroskedasticity and autocorrelation, and (2) extends the Montiel Olea and Pflueger (2013) robust test for models with a single endogenous regressor to multiple endogenous regressors.

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Firm Quality Dynamics and the Slippery Slope of Credit Intervention

Wenhao Li and Ye Li

A salient trend in crisis intervention has emerged in recent decades: government and central banks have offered funding directly to nonfinancial firms, bypassing banks and other credit intermediaries. We analyze the long-term consequences of such policies by focusing on firm quality dynamics. In a laissez-faire economy, firms with high productivity are more likely to survive crises than those with low productivity.

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Choice and Opportunity Costs

Paola Manzini, Marco Mariotti, and Levent Ülkü

We define the (physical) opportunity cost of a choice x as the alternative that would be chosen if x were not available, and the opportunity cost of any unchosen alternative as x itself. The agent has preferences over pairs consisting of alternatives and their opportunity costs. Because costs affect choice and vice-versa, choice results from an intrapersonal equilibrium rather than from simple maximisation.

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Lifecycle Wages and Human Capital Investments: Selection and Missing Data

Laurent Gobillon, Thierry Magnac, and Sébastien Roux

We derive wage equations with individual specific coefficients from a structural model of human capital investment over the life cycle. This model allows for interruptions in labour market participation and deals with missing data and attrition problems. We propose a new framework that deals with missingness at random and is based on factor decompositions that allow for flexible control of selection.

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Diversification, Market Entry, and the Global Internet Backbone

El Hadi Caoui and Andrew Steck

In many industries, buyers diversify their supplier base to manage supplier disruption risk. We investigate the importance of such diversification as a determinant of demand and supplier entry in the context of the internet backbone, the worldwide network of undersea fiber-optic cables that underpins the internet. We specify a model of international bandwidth demand and cable operators’ dynamic entry and supply choices. The model is estimated using novel data on cross-border data flows, prices, cable characteristics, and disruptions.

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Demand Stimulus as Social Policy

Alan J. Auerbach, Yuriy Gorodnichenko, and Daniel Murphy

We exploit a panel of city-level data with rich demographic information to estimate the distributional effects of Department of Defense spending and its effects on a range of social outcomes. The income and employment generated by defense spending accrue predominantly to households without a bachelor’s degree. These households as well as Black and Hispanic households tend to disproportionately benefit from this spending.

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Supply-side climate policies in the oil market: Higher taxes reduce exploration and discoveries. If only OECD countries adopt this policy, 47–73% is offset by non-OECD countries.

New paper by @AhlvikLassi, @jorgenja, Hamang, & @tfharding:

https://www.restud.com/quantifying-supply-side-climate-policies/

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"We prove a CLT for strategic network formation with homophilous agents. This enables inference on statistics derived from a single large network. We discuss practical procedures."

New Paper by Leung & Moon:

https://www.restud.com/normal-approximation-in-large-network-models/

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"A new theory on how regional shocks affect aggregate welfare—applied to US highway network improvements—unpacking how and why it deviates from the Fogel/Hulten characterization."

New paper by @MiyauchiYuhei, @EricDonald, & Fukui:

https://www.restud.com/unpacking-aggregate-welfare-in-a-spatial-economy/

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New paper by Campos-Mercade, Goette, Graeber, Kellogg, and Sprenger:

https://www.restud.com/de-gustibus-and-disputes-about-reference-dependence/

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