flexpaneldid: A Stata Toolbox for Causal Analysis with Varying Treatment Time and Duration
Eva Dettmann, Alexander Giebler, Antje Weyh
IWH Discussion Papers,
No. 3,
2020
Abstract
The paper presents a modification of the matching and difference-in-differences approach of Heckman et al. (1998) for the staggered treatment adoption design and a Stata tool that implements the approach. This flexible conditional difference-in-differences approach is particularly useful for causal analysis of treatments with varying start dates and varying treatment durations. Introducing more flexibility enables the user to consider individual treatment periods for the treated observations and thus circumventing problems arising in canonical difference-in-differences approaches. The open-source flexpaneldid toolbox for Stata implements the developed approach and allows comprehensive robustness checks and quality tests. The core of the paper gives comprehensive examples to explain the use of the commands and its options on the basis of a publicly accessible data set.
Read article
Intangible Capital and Productivity. Firm-level Evidence from German Manufacturing
Wolfhard Kaus, Viktor Slavtchev, Markus Zimmermann
IWH Discussion Papers,
No. 1,
2020
Abstract
We study the importance of intangible capital (R&D, software, patents) for the measurement of productivity using firm-level panel data from German manufacturing. We first document a number of facts on the evolution of intangible investment over time, and its distribution across firms. Aggregate intangible investment increased over time. However, the distribution of intangible investment, even more so than that of physical investment, is heavily right-skewed, with many firms investing nothing or little, and a few firms having very large intensities. Intangible investment is also lumpy. Firms that invest more intensively in intangibles (per capita or as sales share) also tend to be more productive. In a second step, we estimate production functions with and without intangible capital using recent control function approaches to account for the simultaneity of input choice and unobserved productivity shocks. We find a positive output elasticity for research and development (R&D) and, to a lesser extent, software and patent investment. Moreover, the production function estimates show substantial heterogeneity in the output elasticities across industries and firms. While intangible capital has small effects for firms with low intangible intensity, there are strong positive effects for high-intensity firms. Finally, including intangibles in a gross output production function reduces productivity dispersion (measured by the 90-10 decile range) on average by 3%, in some industries as much as nearly 9%.
Read article
Trade, Misallocation, and Capital Market Integration
Laszlo Tetenyi
IWH-CompNet Discussion Papers,
No. 8,
2019
Abstract
I study how cross-country capital market integration affects the gains from trade in a model with financial frictions and heterogeneous, forward-looking firms. The model predicts that misallocation among exporters increases as trade barriers fall, even as misallocation decreases in the aggregate. The reason is that financially constrained productive exporters increase their production only marginally, while unproductive exporters survive for longer and increase their size. Allowing capital inflows magnifies misallocation, because unproductive firms expand even more, leading to a decline in aggregate productivity. Nevertheless, under integrated capital markets, access to cheaper capital dominates the adverse effect on productivity, leading to higher output, consumption and welfare than under closed capital markets. Applied to the period of European integration between 1992 and 2008, I find that underdeveloped sectors experiencing higher export exposure had more misallocation of capital and a higher share of unproductive firms, thus the data is consistent with the model’s predictions. A key implication of the model is that TFP is a poor proxy for consumption growth after trade liberalisation.
Read article
Fiscal Stimulus and Consumer Debt
Yuliya Demyanyk, Elena Loutskina, Daniel Murphy
Review of Economics and Statistics,
No. 4,
2019
Abstract
In the aftermath of the consumer debt–induced recession, policymakers have questioned whether fiscal stimulus is effective during periods of high consumer indebtedness. This study empirically investigates this question. Using detailed data on Department of Defense spending for the 2007–2009 period, we document that the open-economy relative fiscal multiplier is higher in geographies with higher consumer debt. The results suggest that in the short term (2007–2009), fiscal policy can mitigate the adverse effect of consumer (over)leverage on real economic output during a recession. We then exploit detailed microdata to show that both heterogeneous marginal propensities to consume and slack-driven economic mechanisms contribute to the debt-dependent multiplier.
Read article
HIP, RIP, and the Robustness of Empirical Earnings Processes
Florian Hoffmann
Quantitative Economics,
No. 3,
2019
Abstract
The dispersion of individual returns to experience, often referred to as heterogeneity of income profiles (HIP), is a key parameter in empirical human capital models, in studies of life‐cycle income inequality, and in heterogeneous agent models of life‐cycle labor market dynamics. It is commonly estimated from age variation in the covariance structure of earnings. In this study, I show that this approach is invalid and tends to deliver estimates of HIP that are biased upward. The reason is that any age variation in covariance structures can be rationalized by age‐dependent heteroscedasticity in the distribution of earnings shocks. Once one models such age effects flexibly the remaining identifying variation for HIP is the shape of the tails of lag profiles. Credible estimation of HIP thus imposes strong demands on the data since one requires many earnings observations per individual and a low rate of sample attrition. To investigate empirically whether the bias in estimates of HIP from omitting age effects is quantitatively important, I thus rely on administrative data from Germany on quarterly earnings that follow workers from labor market entry until 27 years into their career. To strengthen external validity, I focus my analysis on an education group that displays a covariance structure with qualitatively similar properties like its North American counterpart. I find that a HIP model with age effects in transitory, persistent and permanent shocks fits the covariance structure almost perfectly and delivers small and insignificant estimates for the HIP component. In sharp contrast, once I estimate a standard HIP model without age‐effects the estimated slope heterogeneity increases by a factor of thirteen and becomes highly significant, with a dramatic deterioration of model fit. I reach the same conclusions from estimating the two models on a different covariance structure and from conducting a Monte Carlo analysis, suggesting that my quantitative results are not an artifact of one particular sample.
Read article
Banks' Funding Stress, Lending Supply and Consumption Expenditure
H. Evren Damar, Reint E. Gropp, Adi Mordel
Abstract
We employ a unique identification strategy linking survey data on household consumption expenditure to bank-level data to estimate the effects of bank funding stress on consumer credit and consumption expenditures. We show that households whose banks were more exposed to funding shocks report lower levels of nonmortgage liabilities. This, however, only translates into lower levels of consumption for low income households. Hence, adverse credit supply shocks are associated with significant heterogeneous effects.
Read article
Elevated Uncertainty during the Financial Crisis: Do Effects on Subjective Well-being Differ across European Countries?
Lena Tonzer
B.E. Journal of Economic Analysis and Policy,
No. 2,
2019
Abstract
This paper focuses on the effect of uncertainty as reflected by financial market variables on subjective well-being. The analysis is based on Eurobarometer surveys, covering 18 countries over the period 2000–2013. Individuals report lower levels of life satisfaction in times of higher uncertainty approximated by stock market volatility. This effect is heterogeneous across respondents: the probability of being unsatisfied is higher for respondents who are older, unemployed, less educated, and live in one of the GIIPS countries of the Euro area. Furthermore, higher uncertainty in combination with a financial crisis increases the probability of reporting low values of life satisfaction.
Read article
The Effect of the Single Currency on Exports: Comparative Firm-level Evidence
Tibor Lalinsky, Jaanika Meriküll
IWH-CompNet Discussion Papers,
No. 1,
2019
Abstract
We investigate how adopting the euro affects exports using firm-level data from Slovakia and Estonia. In contrast to previous studies, we focus on countries that adopted the euro individually and had different exchange rate regimes prior to doing so. Following the New Trade Theory we consider three types of adjustment: firm selection, changes in product varieties and changes in the average value of the exports that compose the exports of individual firms. The euro effect is identified by a difference in differences analysis comparing exports by firms to the euro area countries with exports to the EU countries that are not members of the euro area. The results highlight the importance of the transaction costs channel related to exchange rate volatility. We find the euro has a strong pro-trade effect in Slovakia, which switched to the euro from a floating exchange rate, while it has almost no effect in Estonia, which had a fixed exchange rate to the euro prior to the euro changeover. Our findings indicate that the euro effect manifested itself mainly through the intensive margin and that the gains from trade were heterogeneous across firm characteristics.
Read article
Africa’s Skill Tragedy
Jan Bietenbeck, Marc Piopiunik, Simon Wiederhold
Journal of Human Resources,
No. 3,
2018
Abstract
We study the importance of teacher subject knowledge for student performance in Sub-Saharan Africa using unique international assessment data for sixth-grade students and their teachers. To circumvent bias due to unobserved student heterogeneity, we exploit variation within students across math and reading. Teacher subject knowledge has a modest impact on student performance. Exploiting vast cross-country differences in economic development, we find that teacher knowledge is effective only in more developed African countries. Results are robust to adding teacher fixed effects and accounting for potential sorting based on subject-specific factors.
Read article
