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New BGSE Welcome Kit 2018

April 11, 2018


By Marco Albori (Economics ’18)


We are pleased to give you a first ever glance at the new Welcome Kit by Barcelona Graduate School of Economics (limited to one per Master student).

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On the determinants of bitcoin returns: a LASSO approach

March 28, 2018


 By Orestis Vravosinos (Economics ’18)

 

Orestis shares his recent work on bitcoin, joint with professors Theodore Panagiotidis (Univeristy of Macedonia) and Thanasis Stengos (University of Guelph).

The paper is in press and currently available online at Finance Research Letters. It first appeared as a working paper of the Rimini Centre for Economic Analysis (RCEA).

Extended abstract: Bitcoin has recently received increased attention by both investors and researchers. The consumer base, transaction frequency in the digital currencies market and the number of businesses and organizations accepting payments in bitcoin have been rapidly expanding.

In this paper, within a Least Absolute Shrinkage and Selection Operator (LASSO) framework, we examine the significance of factors such as stock market indices, exchange rates, gold and oil, central bank rates, internet trends and policy uncertainty as drivers of bitcoin returns for alternate time (sub)periods within 2010-2017. The advantage of LASSO is that it performs coefficient shrinkage (even setting some coefficients to zero) and in this way automates model selection. Search intensity and gold returns emerge as the most important factors for bitcoin returns.

 

References

Panagiotidis, T., Stengos, T. and Vravosinos, O. (2018). On the determinants of bitcoin returns: a LASSO approach. Finance Research Letters, doi: 10.1016/j.frl.2018.03.016

In Praise of Imperfection

February 11, 2018

Rita Levi Montalcini on her 100th birthday.


By Roberta Sgariglia (International Trade, Finance, and Development ’18)


Ideally, in the best of possible worlds, we would not need a day when we are reminded of exceptional women in science and statistics on gender quotas in American research departments. However, such is the current state of things, and in this relatively brief article I will report the results of a hectic, imperfect and rather personalized attempt I made to address some of the myths, common ideas and stereotypes regarding the role of women in science. The main insights have been drawn from Halpern, Benbow et al (2007), a reading I highly recommend.  I will also briefly share some highlights from the story of Rita Levi Montalcini, who is a source of great inspiration for me, and whose book In Praise of Imperfection this article is named after. As I hope will become clear, I chose this title because of the complex and troubled relationship women generally have with imperfection as well as, obviously, the great consideration I have of Levi Montalcini’s work.

 

The question of whether women can contribute meaningfully to science, how they compare to men in terms of “ability”, whether or not they are underrepresented in STEM academic environments was of little interest to me until fairly recently. As a matter of fact, I have been raised in a country where the greatest strength of the public educational system lies in humanities, classics and history. This particular feature of the Italian “liceo classico” is incredibly enriching in many respects, and it provides students with a unique, though slightly outdated, understanding of the world. Later in life there is always time to gain hard skills that are more in demand, but what does acquire shape in these crucial years for personality formation is a general tendency to see the world through non-scientific “lenses”. Piero Angela, perhaps Italy’s most famous science journalist (who was awarded 10 degrees ad honorem  in a broad range of disciplines), indeed notes that Italian culture is still heavily humanities-centered, and this significantly hampers Italian productivity and growth prospects. Very few children in general see themselves as scientists, let alone girls. Therefore, part of the reason why we need a “Women in Science” day is the fact that some countries and societies do not invest enough in scientific research, and do not understand its value in modern economies.

 

To start with, we need to address a question that I find rather fascinating: can observed differences in female and male behavior and skills be traced back to structural differences in the brain? If that were the case, perhaps our scope for action would be limited. Contrasting evidence has been found on this matter. Male brain size seems to be higher,  which however tells us little about brain functions, the amygdala seems to be larger for men on average as well, and recent studies find that women tend to have thicker prefrontal cortices, which translates into higher general intelligence and cognitive ability, a result that is obviously sensitive to how such a characteristic is defined, measured and sample size used.

 

However, most researchers point out that there are effectively more similarities than differences, and an interesting study of 1400 individuals by the University of Tel Aviv finds that brains are “patchworks of forms” that do not fit into male or female categories, as defined by an index of “maleness” and “femaleness”. Researchers involved in this project argue that the majority of brains observed could be described as a “mosaic” of female and male structures, and therefore it does not make sense to speak about female or male “nature” ex ante. A significant portion of heterogeneity can be accounted for by environmental factors affecting the biological development of the brain. However, no consensus has been reached on these matters. What is worth mentioning though is an idea that is thoroughly explained in Halpern et al (2000): it is extremely difficult to separate biological and environmental factors in brain development and consequently other outcomes deriving from it. As a matter of fact, prenatal hormones as well as other hormones released later in life can develop differently depending on the experiences of the individual in question, as hormonal secretion is altered by the environment. This statement is reassuring: it tells us that there is no reason why women should, a priori, be less competent scientists.

 

Having spent some time on a somewhat biological excursus, let me address the common perception that women may lack or have less “cognitive abilities”, especially those necessary to thrive in science and mathematics. This statement was also made in 2005 by no less than Lawrence Summers. As explained in Halpern et al (2007), evidence has been found that there are differences in some psychological variables between men and women (see Hyde, 2005). However, these discrepancies are generally measured based on the following broad categories of core cognitive skills: verbal, visuospatial, quantitative skills, general reasoning as well as measures of working memory, perceptual speed and mechanical reasoning. First and foremost, these categories are not unitary constructs, they comprise a wide range of skills and activities, for which men and women may have different predispositions. For instance, the two sexes may naturally excel in different components of language use, or different aspects of image processing in the range of visuospatial abilities. In general, women seem to fare better in verbal, memory and general reasoning, while men in quantitative and visuospatial skills. However, as discussed above, we have reason to be skeptical of these generalizations.

 

This brings me to the most important point I want to make. There is consensus that girls generally receive higher grades in school, and that, even when lacking the initial foundations in a specific subject, they tend to perform better in the long run (see Dwyer, Johnson, 1997). They also fare worse in admission and standardized tests than their counterparts, but it has been proven that the latter underpredict academic performance. Bearing this in mind, we should also note that there are no “science abilities” per se: success in STEM research requires a wide range of skills, capabilities, approaches that complement one another and are used simultaneously. Given the evidence on girls’ and women’s ability to learn, and learn effectively, a strong case can be made for higher female involvement in science, a field where thinking differently and rigorously is an asset rather than a restraint.

 

To conclude, I have provided substantive evidence to back the idea that women can not only contribute to science, but can in fact thrive in all sciences. A complex set of factors is holding them back, and this would be a great subject for another article, but in this one I will mention three in particular, and explain how they are connected: perfectionism, low self-esteem and interiorized societal expectations. As a matter of fact, it is understood that women generally have lower self-esteem than their male counterparts, and take action when they are sure they will succeed, basing perception of their own capabilities (and often also self worth) on exterior feedback and reinforcement mechanisms.  This often results in girls and women setting higher standards for themselves than necessary, and striving for an unattainable perfection which they believe is out of their reach. This was one of the main issues Rita Levi Montalcini strived to address in her book In Praise of Imperfection and in her personal life. A Jewish woman, political refugee and Nobel laureate in neurobiology, Rita argued that just like the human brain, an incredibly sophisticated creation, is inherently flawed, we should not strive too hard for perfection, as it is not the essence of nature nor life . Moreover, she encouraged young people, men and women, to “think of the future”, “think of what you can do and do not fear anything”, to build one’s own path and follow one’s own aspirations. Rita is one of the many exceptional women that set the example and took revolutionary stances on controversial matters.  I look forward to a time when great female minds become the norm rather than the exception.

 

References

Dwyer, C.A., & Johnson, L.M. (1997). Grades, accomplishment, and correlates. In W.W. Willingham & N.S. Cole (Eds.), Gender and fair assessment (pp. 127–156). Mahwah, NJ: Erlbaum

Halpern, Benbow et al (2007). The Science of Sex Differences in Science and Mathematics, Association for Psychological Science, Volume 8

Halpern, D.F. (2000). Sex differences in cognitive abilities (3rd ed.). Mahwah, NJ: Erlbaum.

Halpern, D.F. (2004). A cognitive taxonomy for sex differences in cognitive abilities. Current Directions in Psychological Science, 13, 135–139

Hyde, J.S. (2005). The gender similarities hypothesis. American Psychologist, 60, 581–592.

Does tenure reduce incentives for high quality research?

February 3, 2018


By Carl Christian Kontz (International Trade, Finance, and Development ’18)


Economics is a very diverse field of social science with sub disciplines ranging from cultural economics, climate change economics, or sports economics to more traditional fields like trade theory or finance. A fascinating sub discipline, however, is economics itself.

In the following, I will give a brief summary of an interesting article recently published in the Journal of Economic Perspectives. In this contribution the researchers employ econometrics methods and economic theory to examine their own ecosystem.

But why would economists be interested in conducting research about their own profession? Colander (1989, p.1) provides some insight:

“The economics profession is interesting to economists for a number of interrelated reasons:

(1) For prurient and professional interest: It is fun to know about oneself and one’s profession.

(2) As a case study: If economic theory is correct, it should apply to the economics profession. Since economists have firsthand knowledge of the economics profession and relatively easy access to data, it makes an excellent case study.

(3) Because one has an interest in the sociology of knowledge: Recent developments in methodology and philosophy of science have made a knowledge of the scientists an important aspect of a knowledge of science; they are the lens through which science is interpreted. Understanding the tendency of scientists to aim that lens in particular directions and to distort the reality they are studying is necessary if one is to interpret their analyses correctly.”

In the current issue of the Journal of Economic Perspectives (JEP, Vol. 32, No. 1 – Winter 2018), Brogaard and company published an interesting contribution on the impact of tenure on research productivity. The authors examine whether the granting of tenure leads faculty to change their research and publishing behavior by using a sample of all academics who pass through top 50 U.S. economics and finance departments from 1996 through 2014. By using the extreme tails of ex-post citations as a measure of risk-taking in research, they find that both output of research and quality of output peak at the point where tenure is granted and decline thereafter. However, the opposite patterns hold true for the weak end of the tails with rising numbers after tenure. Using a subsample of academics at top 10 U.S. departments, the authors are able to show similar outcomes.

To obtain their results, the authors hand-collect a sample of employment and publishing data of academics at top 50 economics and finance departments in the United States. The sample encompasses the years from 1996 through 2014 and contains a total of 2,763 names, of whom 2,092 are eventually tenured at some point prior to 2014. Brogaard et al. (2018) consider two variables in the years before and after being granted tenure: the total number of publications, which serves as a measure of output; and the number of “home run” publications, meaning highly influential writings, as a measure of quality. By matching these names to publications in the 51 leadings journals in finance and economics, the authors are able to obtain their measure of output. The measure of quality, “home runs”, is defined as publications among the 10 percent’s most cited of all papers published in a given year.

Their findings indicate that both variables peak at the time tenure is granted and decline thereafter. The average output of annual publications by just tenured academics in economics declines by approximately 30 percent over the two subsequent years and further falls by an additional 15 percent over the next eight years. The average number of “home run’s” also falls by 30 percent over the two years after being granted tenure. Moreover, in the subsequent eight years it drops by another 35 percent. Given these findings, the authors calculate that the likelihood of a given publication to receive “home run” status declines by approximately 25 percent during the ten years following tenure.

Given their results, the authors set out to test different explanations which could have effects on the quantity and quality of tenured academics. Among those are:

  • Age effects the ability to produce top-rate tenure
  • Rise in non-research related work which is associated with becoming tenured
  • Tenured academics might branch out into our (sub) disciplines
  • Truly novel research may need time to gain momentum
  • Some schools may have poor tenure contracting

However, the authors test for those and claim that none of the explanations above seem likely given the data.

Brogaard et al. (2018) suggest two explanations which fit their general results: On the one hand, the decline in publication rates is coherent with the idea that tenure is granted once an academic has proven her merit through publishing success. On the other, tenure might reduce risk-taking behavior which leads to lower quality output. Overall, their findings indicate that “tenure is not providing incentives to undertake research in the same quantity and quality that led up to the tenure decision.” (p. 181).

In their conclusion the authors hasten to clarify that “[t]his paper should not be read as an indictment of the institution of tenure” (p. 192) as they only consider one aspect of tenure. Moreover, their work focusses on economics and finance only and cannot be generalized to other fields. However, they believe that their findings raise some practical questions for economic academia and it’s institutions (p.193):

“For economists, the findings suggest that they should be wary of allocating their research time in a way that seems likely to lead to low-impact papers, and instead consider if there is a way for them to continue their earlier research efforts—at least in terms of quality, if not necessarily in quantity. When making a tenure decision, departments of economics and their home institutions should be aware that the research productivity of the person receiving tenure is likely to decline, in both quantity and quality terms, over the following decade. Thus, institutions should consider whether there are methods to sustain (or at least not to impede) high-quality research efforts.”

The paper is available as a PDF using this link to the AEA website:

https://www.aeaweb.org/articles?id=10.1257/jep.32.1.179

 

Citations:

  1. Colander, David. 1989. “Research on the Economics Profession.” Journal of Economic Perspectives, 3(4): 137-148.
  2. Brogaard, Jonathan, Joseph Engelberg, and Edward Van Wesep. 2018. “Do Economists Swing for the Fences after Tenure?” Journal of Economic Perspectives, 32(1): 179-94.

A master student’s experience delivering a TEDx talk on the value of European integration

January 28, 2018

A year ago, master’s student in the Barcelona GSE Finance Program, Patrick Altmeyer gave a talk at TEDx University of Edinburgh on how positive impact European integration has had and should continue to have on our lives contrary. It provides us with greater freedom to choose, learn, exchange ideas, experience, develop. Here he describes his experience as a TEDx speaker and expands on the subject of the talk based on his experience as a student in Barcelona:

“TEDx at the University of Edinburgh was a very challenging and rewarding experience. I loved the thrill of speaking in front of hundreds of people and would definitely enjoy doing something similar again. It also provided my fellow speakers and me with a unique platform to speak out and actually reach people. I was at the time and still am bothered by growing pessimism about the idea of European integration. With my speech I intended to remind people of what’s at stake if in face of undeniable difficulties we simply give up on Europe and return to nationalist agendas.

Experiencing at first hand the recent political developments here in Barcelona has been a true reality check for me. The call for secession is by its very nature anti-unionist. But somehow the many peaceful independence supporters I have seen in the streets – among them many of my Catalan friends – have nothing in common with what we would generally think of as nationalists. Their opponents love to portray the Catalan separatists as anti-European (and themselves as saviours of the union), but personally I don’t buy that. I have realised during my time here that a strive for regional identity can go hand in hand with an open mind for Europe. One of today’s biggest challenges for supporters of integration is therefore to promote a sense of European unity while at the same time recognising that we are a very diverse group of people.”

 

You can watch his TEDx talk from January 2017 here, as well as discover what triggered the idea for this TEDx talk here.

The Implications of Declining Firm-Level Uncertainty for Consumption Variety and Cities (Unicredit & Universities Job Market Best Paper Award)

January 23, 2018

alumni

Editor’s note: In this post, Federica Daniele (Economics ’13 and PhD candidate at UPF-GPEFM) shares a summary of her paper, “The Implications of Declining Firm-Level Uncertainty for Consumption Variety and Cities,” which has won the 2017 UniCredit & Universities Economics Job Market Best Paper Award. She also offers some advice to aspiring PhD students in the Barcelona GSE Master’s programs.


Paper summary

There is something alarming about the direction in which firm dynamics have been changing over the course of the last decades. Today it’s much rarer to encounter firms that undergo large up/downsizings than it used to be in the past: in other words, firms have become more tied to their rank in the firm size distribution. This has been of concern for many economists, who see this happening jointly with a slowdown in aggregate productivity growth and competitiveness. Being aware that the question on the drivers behind this trend and its consequences was still open to debate, coupled with an interest for entrepreneurship, is what pushed me to dive into this topic to better our understanding of the issue in my paper, “The Implications of Declining Firm-Level Uncertainty for Consumption Variety and Cities.”

An explanation for the decline in business dynamism consistent with the data is that technological change has caused the degree of idiosyncratic uncertainty that firms routinely face about their chances to grow to go down. This implies that today most of the return from starting a firm is determined by its initial (in)success as opposed to luck in the development of the business over its life-cycle. Based on evidence drawn from data on the universe of German establishments, in the paper I argue that a reduction in firm-level uncertainty is consistent with lower incentives for potential entrepreneurs to start a new business. My paper offers a new insight into the literature on the role of uncertainty for economic activity: some degree of uncertainty is beneficial, because – by unlocking the opportunity for a given firm to grow large out of fortuitous events (such as a favourable demand turn) – it encourages entrepreneurship. In this sense, my paper provides a defence of the classical argument by Frank Knight according to which risk-taking is a characterising feature of entrepreneurship.

A deficit in the growth rate of the stock of establishments triggered by a decline in firm-level uncertainty is cause of concern for multiple reasons. In my paper, I investigate the importance of two dimensions: first of all, the fact that consumers get to consume a less wide variety of goods than otherwise; and secondly, the fact that, being the loss in entrepreneurship larger in big cities, fewer consumers find appealing to move to large cities than otherwise, thus diminishing the extent of positive spillovers due to higher urban density. Another outcome of interest would have been, for example, the process of innovation within an industry.

All in all, the contribution of this paper consists of assessing both empirically and theoretically novel long-run consequences on economic activity of declining firm-level uncertainty.

Advice for future PhD students

I think Barcelona GSE masters students who are considering going the PhD / academic career route should be strategic. There is no harm in taking one year to do some exploratory work, working as RA, for example, for some good professor, if that buys the time to figure out what kind of research best matches your interests, in which institution you would feel better fulfilled, or whether academia suits you at all.

In the end, if you choose to pursue the academic route, you will have most certainly achieved a better match with the institution/supervisor, and spared a lot of time later on during the course of the PhD, which you can instead dedicate to producing research of good quality.

But even if you decide that academia is not for you, the value of the investment will still be positive, as experimenting early during one’s working career is much less costly than doing it later.

The Web 2.0 in Nigeria: Evaluating the Impact of Increased Internet Access and Usage on Migration

January 18, 2018


By Roberta Sgariglia (International Trade, Finance, and Development ’18)


High speed internet and connectivity are among the main drivers of economic development in today’s information-intensive societies. Hence, in the context of the social sciences, increasing attention has been devoted to implications of technology adoption for traditional outcomes, such as migration, civic engagement and political participation, with particular emphasis on developing countries. As a matter of fact, numerous scholars argue that bridging the digital divide, hence fostering enhanced communication and ease of information access, has the potential to foster empowerment and beneficial innovation opportunities.

Therefore, this paper analyzes the impact of increased internet access on both internal and external migratory flows in Nigeria, where a national broadband expansion plan targeting existing infrastructure in urban areas was enacted in 2013. This effect is evaluated using two difference-in-difference estimations.

The first one assesses whether the policy was successful in enabling higher internet access rates. Convincing evidence was found to prove the effectiveness of the broadband expansion policy to date: in 2015, urban residents were approximately 7% more likely to have access to the internet on average, and these results are robust to different specifications.

The second estimation sets out to understand whether this effect triggered mobility and relocation. The analysis shows that there is a positive and significant effect in the order of 2%, robust to all specifications. However, the model’s explanatory power is low, as structural characteristics of the relevant sections of this dataset used pose significant limitations to the analyses and their potential for generalization. In any case, in the most basic form of the model, it appears that after the policy change urban residents were 1.5% more likely to move. This marginal impact becomes 1.9% once household fixed effects are accounted for. Finally, with respect to external migration probability, the overall significance of the model is not ascertained, so that even though increased internet access seems to have had a slightly negative effect on this outcome, we cannot safely conclude anything about this particular relationship.

As previously mentioned, results are hardly generalizable due to the structural limitations of the dataset, the lack of meaningful control variables and the mostly unexplored nature of migration dynamics in Nigeria.

Indeed, many of these setbacks arise from the relative scarcity or availability of surveys that include questions on information and communication technologies, particularly in developing countries. This in turn is due to the fact that data on mobile connectivity and other digital technology-related information is difficult to obtain, especially for rural communities. In this particular dataset the range of questions on the topic was very limited, which significantly narrowed the scope for the empirical analysis, and hampered the inclusion of meaningful control variables. Questions on mobility were also rather scarce, given that respondents were not directly asked about reasons for their decision: data on labor, education, health was collected in different sections and often could not be merged given that observations were not uniquely identified.

Consequently, the analysis started here can be meaningfully expanded and improved. Interesting extensions would explore the relationship between intrastate migration, a phenomenon which has only recently received the attention it requires, and internet usage: controlling for educational, health-related and employment decisions more accurately, it would be possible to better isolate the effect of internet access on migratory flows. In particular, it would be insightful to verify whether a causal relationship exists, perhaps by identifying a meaningful instrumental variable for this purpose. This would also shed light on whether determinants of internal migrations are actually comparable to those of external flows, as the literature seems to suggest. More specifically, the latter dynamics are largely unexplored in the specific context of Nigeria, and meaningful contributions could attempt to shed light on country-specific drivers of these migratory flows.

Finally, an interesting area of research which is somehow connected to the scope of this paper analyses the impact of digital technology on mobilization, both violent and peaceful, with important implications for policy making. Indeed, internet increases information availability and enhances communication, solving the collective action problem in some instances, while leading to secret coordination with anti-democratic objectives in others. Understanding through which channels, if any, mobilization works analogously to mobility, as well as which factors determine outcomes favorable to democratization rather than not is an extremely relevant question to answer.

 

Source: GSMA Intelligence