http://www.qeconomics.org/ojs/index.php/qe/issue/feedQuantitative Economics2015-08-16T06:22:34+00:00Claire Sashiclaire.sashi@gmail.comOpen Journal Systems<p>Ragnar Frisch, the first president of the <a class="red style1" href="http://www.econometricsociety.org/"><strong>Econometric Society</strong></a> envisioned the society as promoting studies that aim at the unification of the theoretical-quantitative and the empirical-quantitative approach to economic problems and that are penetrated by constructive and rigorous thinking.</p> <p><em> Quantitative Economics</em>, a new journal sponsored by the Econometric Society, is designed to provide a home for papers that fulfill this vision. As such, it will complement the role currently played by <em>Econometrica</em>.</p><p><em>Quantitative Economics</em> will be oriented towards empirical research that is rigorously informed by econometrics and/or economic theory and econometric and theory work that is empirically directed. This does not imply, however, that the journal does not welcome theoretical and computational papers. Theory has a place in the new journal if it has an obvious empirical orientation (such as work on identification or estimation and computational techniques with practical interest).</p><p>The work published by QE will be united by substance rather than methodology. We aim at covering a variety of applied fields, including labour economics, industrial organization, development and growth economics, macroeconomics, international economics, public finance and social economics.</p><p>QE’s editorial board will strive to reduce the length of the editorial process, keeping at a minimum multiple revision and trying to avoid delays while maintaining the highest standards in the editorial process. At the same time, the editorial board is especially interested in providing a forum for papers that are innovative beyond established types of analysis and are willing to challenge conventional ways of conducting empirical work.</p>http://www.qeconomics.org/ojs/index.php/qe/article/view/250Political mergers as coalition formation: An analysis of the Heisei municipal amalgamations2015-08-16T06:12:29+00:00Eric Weeseeric.weese@yale.edu In Japan, a formula‐based transfer system resulted in local benefits from municipal mergers differing substantially from national benefits. A change in this transfer policy and the mergers that resulted are analyzed using a structural model involving private consumption, public good quality, and geographic distance, along with an asymmetric information problem between the national and local levels of government. The merger process is modeled using a cooperative form coalition formation game. Parameter estimates are obtained using a moment inequalities approach that requires neither an equilibrium selection assumption nor the enumeration of all possible mergers. Estimates suggest that the actual merger incentives the national government offered were weak relative to the optimal incentives, and the post‐merger number of municipalities were large relative to the optimal number. Municipal amalgamation moment inequalities stable set Japan D71 D82 H772015-07-31T00:00:00+00:00http://www.qeconomics.org/ojs/index.php/qe/article/view/251Inference on sets in finance2015-08-16T06:12:31+00:00Victor Chernozhukovvchern@mit.eduEmre Kocatulumkocatulum@gmail.comKonrad Menzelkm125@nyu.edu We consider the problem of inference on a class of sets describing a collection of admissible models as solutions to a single smooth inequality. Classical and recent examples include the Hansen–Jagannathan sets of admissible stochastic discount factors, Markowitz–Fama mean–variance sets for asset portfolio returns, and the set of structural elasticities in Chetty's (2012) analysis of demand with optimization frictions. The econometric structure of the problem allows us to construct convenient and powerful confidence regions based on the weighted likelihood ratio and weighted Wald statistics. Our statistics differ from existing statistics in that they enforce either exact or first‐order equivariance to transformations of parameters, making them especially appealing in the target applications. We show that the resulting inference procedures are more powerful than the structured projection methods. Last, our framework is also useful for analyzing intersection bounds, namely sets defined as solutions to multiple smooth inequalities, since multiple inequalities can be conservatively approximated by a single smooth inequality. We present two empirical examples showing how the new econometric methods are able to generate sharp economic conclusions. Hansen–Jagannathan bound Markowitz–Fama bounds Chetty bounds mean–variance sets optimization frictions inference confidence set C10 C502015-08-03T00:00:00+00:00http://www.qeconomics.org/ojs/index.php/qe/article/view/252Estimating overidentified, nonrecursive, time‐varying coefficients structural vector autoregressions2015-08-16T06:12:32+00:00Fabio Canovacanova@eui.euFernando J. Pérez Forerofernando.perez@bcrp.gob.pe This paper provides a general procedure to estimate structural vector autoregressions. The algorithm can be used in constant or time‐varying coefficient models, and in the latter case, the law of motion of the coefficients can be linear or nonlinear. It can deal in a unified way with just‐identified (recursive or nonrecursive) or overidentified systems where identification restrictions are of linear or of nonlinear form. We study the transmission of monetary policy shocks in models with time‐varying and time‐invariant parameters. Time‐varying coefficient structural VAR models Metropolis algorithm identification restrictions monetary transmission mechanism C11 E51 E522015-07-31T00:00:00+00:00http://www.qeconomics.org/ojs/index.php/qe/article/view/253Accounting for cross‐country differences in intergenerational earnings persistence: The impact of taxation and public education expenditure2015-08-16T06:12:32+00:00Hans A. Holterhans.holter@econ.uio.no I document a strong negative cross‐country correlation between intergenerational earnings persistence and measures of tax progressivity and level, and between intergenerational earnings persistence and public expenditure on tertiary education. To explain these correlations, I then develop an intergenerational life‐cycle model of human capital accumulation and earnings that features progressive taxation, public education expenditure, and borrowing constraints among the determinants of earnings persistence. I calibrate the model to U.S. data and use it to decompose the contributions to earnings persistence from different model elements and to quantify how earnings persistence in the United States changes as I introduce tax and education expenditure policies from other countries. I find that individual investments in human capital account for 73% of the estimated intergenerational earnings persistence in the United States. Taxation, through its impact on investments in human capital, can explain 50% of the variation between the United States and 10 other countries, whereas borrowing constraints, which have received much attention in the literature, have a limited impact on earnings persistence. Intergenerational earnings persistence taxation public education expenditure E24 E62 H31 H52 J62 J682015-08-03T00:00:00+00:00http://www.qeconomics.org/ojs/index.php/qe/article/view/254Flexible Bayesian analysis of first price auctions using a simulated likelihood2015-08-16T06:12:33+00:00Dong‐Hyuk Kimdong-hyuk.kim@vanderbilt.edu I propose a Bayesian method to analyze bid data from first‐price auctions under private value paradigms. I use a series representation to specify the valuation density so that bidding monotonicity is always satisfied, and I impose density affiliation by the nonparametric technique of Beresteanu (2007). This flexible method is, therefore, fully compatible with the underlying economic theory. To handle such a rich specification, I use a simulated likelihood, yet obtain a correct posterior by regarding the draws used for simulation as a latent variable to be augmented in the Bayesian framework; see Flury and Shephard, 2011. I provide a step‐by‐step guide of the method, report its performance from various perspectives, and compare the method with the existing one for a range of data generating processes and sample sizes. Finally, I analyze a bid sample for drilling rights in the outer continental shelf that has been widely studied and propose a reserve price that is decision theoretically optimal under parameter uncertainty. First price sealed bid auctions affiliated private values revenue maximizing reserve price Bayesian analysis method of series simulated likelihood shape restriction C11 C13 C15 C44 D44 L382015-07-30T00:00:00+00:00http://www.qeconomics.org/ojs/index.php/qe/article/view/255Likelihood‐ratio‐based confidence sets for the timing of structural breaks2015-08-16T06:12:33+00:00Yunjong Eoyunjong.eo@sydney.edu.auJames Morleyjames.morley@unsw.edu.au We propose the use of likelihood‐ratio‐based confidence sets for the timing of structural breaks in parameters from time series regression models. The confidence sets are valid for the broad setting of a system of multivariate linear regression equations under fairly general assumptions about the error and regressors, and allowing for multiple breaks in mean and variance parameters. In our asymptotic analysis, we determine the critical values for a likelihood ratio test of a break date and the expected length of a confidence set constructed by inverting the likelihood ratio test. Notably, the likelihood‐ratio‐based confidence sets are more precise than other confidence sets considered in the literature. Monte Carlo analysis confirms their greater precision in finite samples, including in terms of maintaining accurate coverage even when the sample size or magnitude of a break is small. An application to postwar U.S. real gross domestic product and consumption leads to a shorter 95% confidence set for the timing of the “Great Moderation” in the mid‐1980s than previously found in the literature. Furthermore, when taking co‐integration between output and consumption into account, confidence sets for structural break dates become even shorter and suggest a “productivity growth slowdown” in the early 1970s and an additional large, abrupt decline in long‐run growth in the mid‐1990s. Inverted likelihood ratio multiple breaks system of equations Great Moderation productivity growth slowdown C22 C32 E202015-08-03T00:00:00+00:00http://www.qeconomics.org/ojs/index.php/qe/article/view/256Combinatorial approach to inference in partially identified incomplete structural models2015-08-16T06:12:33+00:00Marc Henrymarc.henry@psu.eduRomuald Méangomeango@ifo.deMaurice Queyrannemaurice.queyranne@sauder.ubc.ca We propose a computationally feasible inference method in finite games of complete information. Galichon and Henry, 2011 and Beresteanu, Molchanov, and Molinari, 2011 show that the empirical content in such models is characterized by a collection of moment inequalities whose number increases exponentially with the number of discrete outcomes. We propose an equivalent characterization based on classical combinatorial optimization methods that allows the construction of confidence regions with an efficient bootstrap procedure that runs in linear computing time. The method can be applied to the empirical analysis of cooperative and noncooperative games, instrumental variable models of discrete choice, and revealed preference analysis. We propose an application to the determinants of long term elderly care choices. Incomplete structural models multiple equilibria partial identification sharp bounds confidence regions max‐flow–min‐cut functional quantile bootstrap elderly care C13 C722015-07-31T00:00:00+00:00http://www.qeconomics.org/ojs/index.php/qe/article/view/257Research and development, profits, and firm value: A structural estimation2015-08-16T06:12:34+00:00Missaka Warusawitharanam1mnw00@frb.gov This study presents a model in which firms invest in research and development (R&D) to generate innovations that increase their underlying profitability and invest in physical capital to produce output. Estimating the model using a method of moments approach reveals that R&D expenditures contribute significantly to profits and firm value. The model also captures variation in R&D intensity, profits, and firm value across R&D‐intensive industries. Counterfactual experiments suggest that changes in the distribution of firms in the economy may, over the long run, mitigate tax policy changes designed to encourage R&D expenditures. Research and development structural estimation firm dynamics policy evaluation D22 O32015-08-03T00:00:00+00:00