EconStor Collection:
http://hdl.handle.net/10419/64140
2024-03-19T01:26:04ZHow likely is it that omitted variable bias will overturn your results?
http://hdl.handle.net/10419/283965
Title: How likely is it that omitted variable bias will overturn your results?
Authors: Basu, Deepankar
Abstract: Building on a recently developed methodology for sensitivity analysis that parametrizes omitted variable bias in terms of partial R2 measures, I propose a simple statistic to capture the severity of omitted variable bias in any observational study: the probability of omitted variable bias overturning the reported result. The central element of my proposal is formal covariate benchmarking, whereby researchers choose an observed regressor (or a group of observed regressors) to benchmark the relative strength of association of the omitted regressor with the outcome variable and with the treatment variable. These relative strengths of association function as the two sensitivity parameters of the analysis. By allowing these sensitivity parameters to take all permissible values, we get the most conservative estimate of the probability that omitted variable bias can overturn the reported results. By using absolute and relative limits on the maximum values of the sensitivity parameters based on institutional knowledge or other details of the particular study, a researcher can generate less conservative estimates of that probability. For empirical studies with relatively large number of regressors and sample sizes, I suggest bounds for the sensitivity parameters based on simulation studies. I illustrate the methodology using an empirical example that studies the effect of exposure to violence on attitudes towards peace.2024-01-01T00:00:00ZSellers' inflation, profits and conflict: Why can large firms hike prices in an emergency?
http://hdl.handle.net/10419/283956
Title: Sellers' inflation, profits and conflict: Why can large firms hike prices in an emergency?
Authors: Weber, Isabella; Wasner, Evan
Abstract: The dominant view of inflation holds that it is macroeconomic in origin and must always be tackled with macroeconomic tightening. In contrast, we argue that the US COVID-19 inflation is predominantly a sellers' inflation that derives from microeconomic origins, namely the ability of firms with market power to hike prices. Such firms are price makers, but they only engage in price hikes if they expect their competitors to do the same. This requires an implicit agreement which can be coordinated by sector-wide cost shocks and supply bottlenecks. We review the long-standing literature on price-setting in concentrated markets and survey earnings calls and compile firm-level data to derive a three-stage heuristic of the inflationary process: (1) Rising prices in systemically significant upstream sectors due to commodity market dynamics or bottlenecks create windfall profits and provide an impulse for further price hikes. (2) To protect profit margins from rising costs, downstream sectors propagate, or in cases of temporary monopolies due to bottlenecks, amplify price pressures. (3) Labor responds by trying to fend off real wage declines in the conflict stage. We argue that such sellers' inflation generates a general price rise which may be transitory, but can also lead to self-sustaining inflationary spirals under certain conditions. Policy should aim to contain price hikes at the impulse stage to prevent inflation from the onset.2023-01-01T00:00:00ZPhillips curves, behavioral economics and post-Keynesian macroeconomics
http://hdl.handle.net/10419/283958
Title: Phillips curves, behavioral economics and post-Keynesian macroeconomics
Authors: Skott, Peter
Abstract: Post-Keynesians have questioned the relevance of behavioral economics on methodological grounds, citing the predominant focus of the behavioral literature on possible deviations of individual behavior from extreme standards of perfect optimization. The very limited influence of behavioral economics on post-Keynesian economics is unfortunate, however: it would a serious mistake to ignore the insights and empirical evidence from behavioral economics. The influence of norms of fairness on wage formation and inflation is used to illustrate this argument.2023-01-01T00:00:00ZCovariate benchmarking for sensitivity analysis when the confounder is correlated with observed covariates
http://hdl.handle.net/10419/283960
Title: Covariate benchmarking for sensitivity analysis when the confounder is correlated with observed covariates
Authors: Basu, Deepankar
Abstract: Covariate benchmarking is an important part of sensitivity analysis about omitted variable bias and can be used to bound the strength of the unobserved confounder using information and judgments about observed covariates. It is common to carry out formal covariate benchmarking under the assumption that the unobserved confounder is orthogonal to the observed covariates. This assumption is restrictive and will be difficult to defended in most empirical analyses. In this paper I show that relaxing the orthogo- nality assumption leads to a breakdown of a recently proposed innovative formal covariate benchmarking methodology.2023-01-01T00:00:00Z