LCERPA members offer expertise in a wide range of fields. On this page we provide information on our members' 2018 research and publications, including papers published as part of the LCERPA Working Paper Series.

Earlier years' publications and working papers :   Current   2018   2017   2016   2015   2014   2013   2012   2011   2010   2009   2008

Claus, E., I. Claus and L. Krippner. 2018. "Asset Market Responses to Conventional and Unconventional Monetary Policy Shocks in the United States" Journal of Banking and Finance, 97(December): 279-282.

Claus, E. and V.H. Nguyen. 2018. "Consumptor Economicus: How Do Consumers Form Expectations on Economic Variables?" Journal of Economic Behavior and Organization, 152(August): 254-275.

Lombardi, D., P. Siklos, and S. St.Amand. 2018. "A Survey of the International Evidence and Lessons Learned About Unconventional Monetary Policies: Is a ‘New Normal’ in our Future?" Journal of Economic Surveys, 32(5): 1229-1256.

Lombardi, D., P. Siklos, and X. Xie. 2018. "Monetary Policy Transmission in Systemically Important Economies and China’s Impact" Journal of Asian Economics, 59(December): 61-79.

McCaig, B., D. Benjamin, L. Brandt and Nguyen L.H. 2018. Program participation in a targeted land distribution program and household outcomes: Evidence from Vietnam. Review of Economics of the Household, 16(1), 41-74.

McCaig, B. and N. Pavcnik. 2018. Export markets and labor allocation in a low-income country. American Economic Review, 108(7), 1899-1941.

Milligan, K. and T. Schirle. 2018. "Health capacity to work of older Canadians: gender and regional dimensions." Canadian Public Policy, June 2018 44(2): 159-172.

Milligan, K. and T. Schirle. 2018. The labour force participation of older men in Canada In Social Security Programs Around the World: Working Longer. Courtney Coile, Kevin Milligan and David A. Wise (eds.) NBER Book Series. University of Chicago Press.

Schirle, T. and M. Veall. 2018. Retirement in the Canadian Longitudinal Study on Aging in P. Raina, C. Wolfson, S. Kirkland, and L. Griffith (eds.), The Canadian Longitudinal Study on Aging (CLSA) Report on Health and Aging in Canada: Findings from Baseline Data Collection 2010-2015. Canadian Longitudinal Study on Aging.

Saguil, K. and C. Neill. Universally Subsidized Day Care and its Effects on Youth Crime Rates: Evidence from Quebec LCERPA Working Paper no. 2015-14, September 2015.

Abstract. Research from intensive, targeted early childhood intervention programs suggests they can have large, long-run private and public benefits, much of which come from reductions in the propensity to engage in criminal activity. That research is being used to advocate for increased government expenditures universal early childhood programs. However, it is not clear that interventions would have the same effects on the general population as they do on disadvantaged children. The introduction of Quebec’s universally subsidized day care program in 1997 provides an opportunity to take a first glimpse at the long run effects of a non-targeted early childhood program. Studies of the short-run effects of the program show no evidence of improvements in child development in the short run, but the long run effects have not been studied. We use a difference-in-differences strategy to examine the policy’s effects on youth crime rates, using the rest of Canada as the counterfactual. Overall, we find no evidence of large reductions in youth crime rates among the cohort of Quebec youth following the introduction of subsidized day care relative to youth in the rest of Canada – indeed, if anything, they appear to have increased. We conclude that caution is necessary in using findings of large social benefits of early childhood education from small, intensive, targeted interventions to draw conclusions that larger-scale universal programs implemented in a different context.

Kaplan, T.R. and B.J. Ruffle. Waiting to Cooperate? Cooperation in one-stage and two-stage games LCERPA Working Paper No. 2015-13, September 2015.

Abstract. Cooperation between two players often requires exactly one to take the available action, while the other acquiesces. If the decisions whether to pursue the action are made simultaneously, then neither or both may acquiesce leading to an inefficient outcome. However, inefficiency may be avoided if players move sequentially. We test experimentally whether two-stage versions of this entry-exit game enhance cooperation. In one version, players may wait in the first stage to see what their paired player did and then coordinate in the second stage. In another version, sequential decision-making is imposed by assigning one player to move in stage one and the other player in stage two. Although there are fewer cooperative decisions in the two-stage treatments, we show that subjects coordinate better on efficient cooperation and on avoiding both acquiescing. Consequently they achieve higher profits. Yet, the least cooperative pairs do worse in the two-stage games than their single-stage counterparts. They use the second stage not to facilitate coordination but to disguise their uncooperative play or to punish their opponents.

Ruffle, B.J. and Y. Tobol. Clever enough to tell the truth. LCERPA Working Paper No. 2015-12, September 2015 (updated March 2016).

Abstract. We conduct a field experiment on 427 Israeli soldiers who each rolled a six-sided die in private and reported the outcome. For every point reported, the soldier received an additional half-hour early release from the army base on Thursday afternoon. We find that the higher a soldier’s military entrance score, the more honest he is on average. We replicate this finding on a sample of 156 civilians paid in cash for their die reports. Furthermore, the civilian experiments reveal that two measures of cognitive ability predict honesty, whereas self-report honesty questions and a consistency check among them are of no value. We provide a rationale for the relationship between cognitive ability and honesty and discuss the generalizability of this result.

Koebel, K. and T. Schirle. The differential impact of universal child benefits on the labor supply of married and single mothers LCERPA Working Paper No. 2015-11, May 2015.

Abstract. Using a difference-in-differences estimator, we find the Canadian Universal Child Care Benefit (a demogrant paid to families with children under age 6 that was introduced in July 2006) has significant negative effects on the labor supply of legally married mothers but significant positive effects on the labor supply of single mothers. The positive effect for single mothers is concentrated among divorced mothers, with results suggesting divorced mothers’ likelihood of participating in the labor force rises by 2.8 percentage points when receiving the benefit. This contrasts with a reduction in the likelihood of legally married mothers participating in the labor force by 1.4 percentage points. Further, the effects for single moms primarily represent entry to employment and the labor force (extensive margin) and not an increase in hours among those who would have been working without the benefits. The estimated effects for common-law married mothers and single never-married mothers are not statistically significant.

Ruffle, B.J., A. Weiss and A. Etziony "The Role of Critical Mass in Establishing a Successful Network Market: An Experimental Investigation." LCERPA Working Paper No. 2015-10, May 2015.

Abstract. A network market is a market in which the benefit each consumer derives from a good is an increasing function of the number of consumers who own the same or similar goods. A major obstacle that plagues the introduction of a network good is the ability to reach critical mass, namely, the minimum number of buyers required to render purchase worthwhile. This can be likened to a coordination game with multiple Pareto-ranked equilibria. Through a series of experiments, we study consumers' ability to coordinate on purchasing the network good. Our results highlight the central importance of the level of the critical mass. Neither an improved reward-risk ratio through lower prices nor previous success at a lower critical mass facilitates the establishment of a network market when the critical mass is sufficiently high.

Snoddon, T. "Prospects for Integrated Carbon Taxes in Canada: Lessons from Federal-Provincial Tax Coordination." LCERPA Working Paper No. 2015-9, May 2015.

Abstract. The global nature of the climate change externality calls for a global response but so far none has emerged. Instead, climate policies are being implemented by subnational and national governments, resulting in a fragmented policy landscape at the national level. This is certainly the case in Canada. While this outcome is not particularly surprising, from an economics perspective, it is arguably more costly, less efficient, and less effective at achieving emissions reductions than a more harmonized approach. Is this outcome the unavoidable price of Canadian federalism? Is a more harmonized carbon tax approach feasible? This paper considers Canada’s experience with three major taxes, jointly occupied by federal and provincial governments. Despite its highly decentralized structure, Canada has a history of tax harmonization and coordination arrangements for these taxes. By examining the evolution of these arrangements, the paper offers insights on the prospects of adopting a more harmonized carbon tax approach to address climate change.

Daniel, B.C. and C. Shiamptanis. "Predicting Sovereign Fiscal Crises: High-Debt Developed Countries." LCERPA Working Paper No. 2015-8, *Updated* March 2017.

Abstract. Every country has a fiscal limit on debt, where that limit represents a debt level so high that the country's economic and political systems cannot raise taxes or reduce spending sufficiently to maintain solvency. At the limit, creditors flee, and the government faces a fiscal crisis. If we knew the limit, then we could estimate the probability of a fiscal crisis as the probability of reaching the limit. Governments do not announce their fiscal limits. In this paper, we estimate fiscal feedback rules for six-high-debt developed countries to investigate the extent to which the systematic response of the primary surplus to debt reveals information on the fiscal limit. In general, estimation of a fiscal feedback rule does not reveal an explicit fiscal limit for a country that has not experienced a crisis. However, estimates of long-run debt, together with debt history, can be combined to yield an estimate of a lower bound on the fiscal limit. We use estimates of the fiscal rule for six high-debt developed countries to project debt forward from dates, following the beginning of the financial crisis, and compare the projections with our estimates of the lower bound on debt. We label countries, whose debt projections exceed the lower bound as high-risk. Both Greece and Portugal enter the high-risk category about one year prior to their financial crises. Italy is at high risk in 2012 and others are at low risk through 2012.

Pelloni, G. and M. Savioli. "Why is Italy doing so badly?" LCERPA Working Paper No. 2015-7, April 2015.

Abstract. We present the current Italian economic crisis as a phase of a major systemic decline. We argue that “Italy’s system” has forced the country to abandon a “dynamic” view of comparative advantage, crucial for sustained economic growth, in favour of a “static” view of specialization. Creative destruction has been hampered and the indispensable sectoral restructuring has not taken place, leading to stagnation. The roots of this decline lay in collective action issues and an implicit contract between elites and civil society. We suggest that solving these issues is indispensable in order to support a “dynamic” view of comparative advantage and so the re-start of the Italian economy and society.

Schirle, T. "The gender wage gap in the Canadian provinces, 1997-2014." LCERPA Working Paper No. 2015-6, April 2015. More information about this project can be found here.

Abstract. This study examines the gender gaps in average hourly wages facing private sector full time employees in the Canadian provinces, using data from the Canadian Labour Force Survey. Over the 1997-2014 period, all provinces have made progress toward narrowing the gender wage gap, though notably little progress was made in Newfoundland and Alberta. Much of the variation across provinces in the gender gap is eliminated once we account for gender differences in individual and job characteristics in each province. Decomposition results suggest a large portion of the wage gap in each province is explained by gender differences in industry and occupation. The unexplained portion of the wage gap has been reduced in many provinces as gender differences in industry and occupation play an increasingly important role.

Bohl, M.T., J. Diesteldorf, and P.L. Siklos. The effect of index futures trading on volatility: Three markets for Chinese stocks LCERPA Working Paper No. 2015-5, February 2015. (This paper has been accepted for publication in China Economic Review as "Volatility Spillovers in Spot and Futures Markets: The case of China's First Stock Index Futures.")

Abstract. This paper examines whether the introduction of Chinese stock index futures had an impact on the volatility of the underlying spot market. To this end, we estimate several Generalized Auto-Regressive Conditional Heteroscedasticity (GARCH) models and compare our findings for mainland China with Chinese index futures traded in Singapore and Hong Kong. Our results indicate that Chinese index futures decrease spot market volatility in all three spot markets considered. In contrast, we do not obtain the same results for the companion index futures markets in Hong Kong and Singapore. China’s stock market is relatively young and largely dominated by private retail investors. Nevertheless, our evidence is favorable to the stabilization hypothesis usually confirmed in mature markets.

Filardo, A.J. and P.L. Siklos. Prolonged Reserves Accumulation, Credit Booms, Asset Prices and Monetary Policy in Asia LCERPA Working Paper No. 2015-4, February 2015. (This paper has been accepted for publication in Emerging Markets Trade and Finance.)

Abstract. This paper examines past evidence of prolonged periods of foreign exchange reserves accumulation in the Asia-Pacific region. Several proxies for this unobserved variable are considered, including a newly proposed one based on a factor model. We focus on identifying periods of prolonged interventions and identify its key macro-financial determinants. Two broad conclusions emerge from the stylized facts and the econometric evidence. First, the best protection against costly reserves accumulation is a more flexible exchange rate. Second, the necessity to accumulate reserves as a bulwark against goods price inflation is misplaced. Instead, there is a strong link between asset price movements and the likelihood of accumulating foreign exchange reserves that are costly. Policy implications are also drawn.

Siklos, P.L. and B Lavender. The credit cycle and the business cycle in Canada and the U.S.: Two solitudes? LCERPA Working Paper No. 2015-3, February 2015. (This paper has been accepted for publication in Canadian Public Policy.)

Abstract. Recent events highlight the importance of understanding the relationship between credit availability and real economic activity. This paper estimates macroeconomic models for Canada to investigate the relationship between changes in non-price lending standards, business loans and output. We ask whether macroeconomic and financial market conditions in the U.S. affect Canadian macroeconomic and financial conditions. The answer seems to be less so than previous evidence suggests. Real time data are also found to have a significant impact on the results. The U.S. and Canada may indeed be likened to ‘two solitudes’ insofar as the impact of credit conditions is concerned. Differences in the quality of banking standards and supervision of financial institutions, as well differences in the effectiveness of monetary policies in the two countries may partially explain the results.

Claus, E., and M. Dungey. Can monetary policy surprise the market? LCERPA Working Paper No. 2015-2, January 2015. (This paper has also been published in the CAMA's working paper series.)

Abstract. This paper extracts measures of monetary policy surprises for Australia, Canada and the United States using a latent factor framework. We distinguish monetary policy surprises which occur when central banks report new assessments of the economy (or do not reinforce changes expected by market assessments) from those when policy makers appear to change their preferences. Changing policy preferences are evident in all jurisdictions, particularly during periods of stress. No-change policy announcements have distinctly differing impacts across the three countries; in Canada these have the same impact as policy changes, in Australia they are not discernibly different to a normal trading day and the US market lies between these scenarios. The revealed differences in size and type of the policy surprise outcomes for these operationally similar central banks suggests that the role of transparency policy is more subtle than previously appreciated.

Boeringer, C., N. Rivers, T. Rutherford, and R. Wigle. "Sharing the burden for climate change mitigation in the Canadian federation." LCERPA Working Paper No. 2015-1, January 2015 (posted with SSRN by ZenTra Centre for Transnational Studies in 2014).
This paper has been accepted for publication in the Canadian Journal of Economics.

Abstract. Dividing the burden for greenhouse gas abatement amongst the provinces has proven challenging in Canada, and is a major factor contributing to Canada’s poor historic performance on greenhouse gas abatement. As the country aims to achieve substantial cuts to emissions over the next decade and by mid-century, such burden sharing considerations are likely to be elevated in importance. This paper uses a detailed Canadian computable general equilibrium model to compare a number of archetypal rules for sharing the burden of a joint commitment amongst members for the case of greenhouse gas reductions in Canada. Because of the substantial heterogeneity amongst Canadian provinces, these different burden sharing rules imply significantly different relative abatement effort amongst provinces, and also significantly different welfare implications. We compare these archetypal burden sharing rules to existing provincial emission reduction commitments, and find that none of the standard burden sharing rules comes close to existing commitments. We argue that future efforts to share the burden of greenhouse gas abatement in Canada would be more successful if they were informed by a formal analysis such as the one presented here.

Milligan, K. and T. Schirle. 2018. Rich Man, Poor Man: The Policy Implications of Canadians Living Longer/a> C.D. Howe Institute E-Brief 282, August 2018.