New articles on Economics

[1] 2404.11705

A Comparative Study for Various Alternatives of Electric Vehicles, Internal Combustion Engine Vehicles and Hybrid Vehicles in India

Electric vehicles (EVs) are increasingly becoming popular as a viable means of transportation for the future. The use of EVs may help in providing better climatic conditions in urban areas with a pocket friendly cost for transportation to the consumers throughout its life. EVs enact as a boon to the society by providing zero tailpipe emissions, better comfort, low lifecycle cost and higher connectivity. The article aims to provide scientific information throughout the literature across various aspects of EVs in their lifetime and thus, assist the scholarly community and various organisations to understand the impact of EVs. In this study we have gathered information from the articles published in SCOPUS database and through grey literature with the focus of information post 2009. We have also used a hybrid methodology using Best-Worst Method (BWM) and technique for order preference by similarity to ideal solution (TOPSIS) for comparing EVs, internal combustion engine vehicles (ICEVs) and hybrid vehicles in various price segments. The study has helped us conclude that EVs should be preferred over ICEVs and hybrids by the users.

[2] 2404.11739

Testing Mechanisms

Economists are often interested in the mechanisms by which a particular treatment affects an outcome. This paper develops tests for the ``sharp null of full mediation'' that the treatment $D$ operates on the outcome $Y$ only through a particular conjectured mechanism (or set of mechanisms) $M$. A key observation is that if $D$ is randomly assigned and has a monotone effect on $M$, then $D$ is a valid instrumental variable for the local average treatment effect (LATE) of $M$ on $Y$. Existing tools for testing the validity of the LATE assumptions can thus be used to test the sharp null of full mediation when $M$ and $D$ are binary. We develop a more general framework that allows one to test whether the effect of $D$ on $Y$ is fully explained by a potentially multi-valued and multi-dimensional set of mechanisms $M$, allowing for relaxations of the monotonicity assumption. We further provide methods for lower-bounding the size of the alternative mechanisms when the sharp null is rejected. An advantage of our approach relative to existing tools for mediation analysis is that it does not require stringent assumptions about how $M$ is assigned; on the other hand, our approach helps to answer different questions than traditional mediation analysis by focusing on the sharp null rather than estimating average direct and indirect effects. We illustrate the usefulness of the testable implications in two empirical applications.

[3] 2404.11767

Regret Analysis in Threshold Policy Design

Threshold policies are targeting mechanisms that assign treatments based on whether an observable characteristic exceeds a certain threshold. They are widespread across multiple domains, such as welfare programs, taxation, and clinical medicine. This paper addresses the problem of designing threshold policies using experimental data, when the goal is to maximize the population welfare. First, I characterize the regret (a measure of policy optimality) of the Empirical Welfare Maximizer (EWM) policy, popular in the literature. Next, I introduce the Smoothed Welfare Maximizer (SWM) policy, which improves the EWM's regret convergence rate under an additional smoothness condition. The two policies are compared studying how differently their regrets depend on the population distribution, and investigating their finite sample performances through Monte Carlo simulations. In many contexts, the welfare guaranteed by the novel SWM policy is larger than with the EWM. An empirical illustration demonstrates how the treatment recommendation of the two policies may in practice notably differ.

[4] 2404.11794

Automated Social Science: Language Models as Scientist and Subjects

We present an approach for automatically generating and testing, in silico, social scientific hypotheses. This automation is made possible by recent advances in large language models (LLM), but the key feature of the approach is the use of structural causal models. Structural causal models provide a language to state hypotheses, a blueprint for constructing LLM-based agents, an experimental design, and a plan for data analysis. The fitted structural causal model becomes an object available for prediction or the planning of follow-on experiments. We demonstrate the approach with several scenarios: a negotiation, a bail hearing, a job interview, and an auction. In each case, causal relationships are both proposed and tested by the system, finding evidence for some and not others. We provide evidence that the insights from these simulations of social interactions are not available to the LLM purely through direct elicitation. When given its proposed structural causal model for each scenario, the LLM is good at predicting the signs of estimated effects, but it cannot reliably predict the magnitudes of those estimates. In the auction experiment, the in silico simulation results closely match the predictions of auction theory, but elicited predictions of the clearing prices from the LLM are inaccurate. However, the LLM's predictions are dramatically improved if the model can condition on the fitted structural causal model. In short, the LLM knows more than it can (immediately) tell.

[5] 2404.11839

(Empirical) Bayes Approaches to Parallel Trends

We consider Bayes and Empirical Bayes (EB) approaches for dealing with violations of parallel trends. In the Bayes approach, the researcher specifies a prior over both the pre-treatment violations of parallel trends $\delta_{pre}$ and the post-treatment violations $\delta_{post}$. The researcher then updates their posterior about the post-treatment bias $\delta_{post}$ given an estimate of the pre-trends $\delta_{pre}$. This allows them to form posterior means and credible sets for the treatment effect of interest, $\tau_{post}$. In the EB approach, the prior on the violations of parallel trends is learned from the pre-treatment observations. We illustrate these approaches in two empirical applications.

[6] 2404.11883

Testing the simplicity of strategy-proof mechanisms

This paper experimentally evaluates four mechanisms intended to achieve the Uniform outcome in rationing problems (Sprumont, 1991). Our benchmark is the dominant-strategy, direct-revelation mechanism of the Uniform rule. A strategically equivalent mechanism that provides non-binding feedback during the reporting period greatly improves performance. A sequential revelation mechanism produces modest improvements despite not possessing dominant strategies. A novel, obviously strategy-proof mechanism, devised by Arribillaga et al. (2023), does not improve performance. We characterize each alternative to the direct mechanism, finding general lessons about the advantages of real-time feedback and sequentiality of play as well as the potential shortcomings of an obviously strategy-proof mechanism.

[7] 2404.12214

Income Shocks and their Transmission into Consumption

This article reviews the economics literature of, primarily, the last 20 years, that studies the link between income shocks and consumption fluctuations at the household level. We identify three broad approaches through which researchers estimate the consumption response to income shocks: 1.) structural methods in which a fully or partially specified model helps identify the consumption response to income shocks from the data; 2.) natural experiments in which the consumption response of one group who receives an income shock is compared to another group who does not; 3.) elicitation surveys in which consumers are asked how they expect to react to various hypothetical events.

[8] 2404.12332

Decision making in stochastic extensive form I: Stochastic decision forests

A general theory of stochastic decision forests reconciling two concepts of information flow -- decision trees and refined partitions on the one hand, filtrations from probability theory on the other -- is constructed. The traditional "nature" agent is replaced with a one-shot lottery draw that determines a tree of a given decision forest, while each "personal" agent is equipped with an oracle providing updates on the draw's result and makes partition refining choices adapted to this information. This theory overcomes the incapacity of existing approaches to extensive form theory to capture continuous time stochastic processes like Brownian motion as outcomes of "nature" decision making in particular. Moreover, a class of stochastic decision forests based on paths of action indexed by time is constructed, covering a large fraction of models from the literature and constituting a first step towards an approximation theory for stochastic differential games in extensive form.

[9] 2404.12193

Portrait comparison of binary and weighted Skill Relatedness Networks

In this paper we compare Skill-Relatedness Networks (SRNs) for selected countries, that is to say statistically significant inter-industrial interactions representing latent skills exchanges derived from observed labor flows, a kind of industry spaces. Using data from Argentina (ARG), Germany (DEU) and Sweden (SWE), we compare their SRNs utilizing an information-theoretic method that permits to compare networks of "non-aligned" nodes, which is the case of interest. For each SRN we extract its portrait, a fingerprint of structural measures of the distributions of their shortest paths, and calculate their pairwise divergences. This allows us also to contrast differences in structural (binary) connectivity with differences in the information provided by the (weighted) skill relatedness indicator (SR). We find that, in the case of ARG, structural connectivity is very different from their counterpart in DEU and SWE, but through the glass of SR the distances analyzed are all substantially smaller and more alike. These results qualify the role of the SR indicator as revealing some hidden dimension different from connectivity alone, providing empirical support to the suggestion that industry spaces may differ across countries.