http://repub.eur.nl/res/org/9735/ List of Publications en http://repub.eur.nl/static-eur/img/logo.png http://repub.eur.nl http://repub.eur.nl/res/pub/32244/ 2012-05-10T00:00:00Z This thesis is about forecasting situations which involve econometric models and expert intuition. The first three chapters are about what it is that experts do when they adjust statistical model forecasts and what might improve that adjustment behavior. It is investigated how expert forecasts are related to model forecasts, how this potential relation is influenced by other factors and how it influences forecast accuracy, how feedback influences forecasting behavior and accuracy and which loss function is associated with experts’ forecasts. The final chapter focuses on how to make use in an optimal way of multiple forecasts produced by multiple experts for one and the same event. It is found that potential disagreement amongst forecasters can have predictive value, especially when used in Markov regime-switching models. Legerstee, R. http://repub.eur.nl/res/pub/32104/ 2012-04-10T00:00:00Z In many organizations, reward decisions depend on subjective performance evaluations. However, evaluating an employee's performance is often difficult. In this paper, we develop a model in which the employee is uncertain about his own performance and about the manager's ability to assess him. The manager gives an employee a performance appraisal with a view of affecting the employee's self perception, and the employee's perception of the manager's ability to assess performance. We examine how performance appraisals affect the employee's future performance. The predictions of our model are consistent with various empirical findings. These comprise (i) the observation that managers tend to give positive appraisals, (ii) the finding that on average positive appraisals motivate more than negative appraisals, and (iii) the observation that the effects of appraisals depend on the employee's perception of the manager's ability to assess performance accurately. Kamphorst, J.J.A. Swank, O.H. http://repub.eur.nl/res/pub/32102/ 2012-03-26T00:00:00Z Growing interest in using personality variables in economic research leads to the question whether personality as measured by psychology is useful to predict economic behavior. Is it reasonable to expect values on personality scales to be predictive of behavior in economic games? It is undoubted that personality can influence large-scale economic outcomes. Whether personality variables can also be used to understand micro-behavior in economic games is however less clear. We discuss reasons in favor and against this assumption and test in our own experiment, whether and which personality factors are useful in predicting behavior in the trust or investment game. We can also use the trust game to understand how personality measures fare relatively in predicting behavior when situational constraints vary in strength. This approach can help economists to better understand what to expect from the inclusion of personality variables in their models and experiments, and where further research might be useful and needed. Muller, J. Schwieren, C. http://repub.eur.nl/res/pub/32101/ 2012-03-20T00:00:00Z The empirical support for features of a Dynamic Stochastic General Equilibrium model with two technology shocks is valuated using Bayesian model averaging over vector autoregressions. The model features include equilibria, restrictions on long-run responses, a structural break of unknown date and a range of lags and deterministic processes. We find support for a number of features implied by the economic model and the evidence suggests a break in the entire model structure around 1984 after which technology shocks appear to account for all stochastic trends. Business cycle volatility seems more due to investment specific technology shocks than neutral technology shocks. Strachan, R.W. Dijk, H.K. van http://repub.eur.nl/res/pub/31779/ 2012-02-29T00:00:00Z Social networks, be it on the internet or in real life, facilitate information flows. We model this by giving agents incentives to link with others and receive information through those links. In many networks agents will value confirmation of the information they receive from others. Our paper analyzes the impact such a need for confirmation has on the social networks which are formed. We first study the existence of Nash equilibria and then characterize the set of strict Nash networks. Next, we characterize the set of strictly ecient networks and discuss the relationship between strictly efficient networks and strict Nash networks. Billand, P. Bravard, C. Kamphorst, J.J.A. Sarangi, S. http://repub.eur.nl/res/pub/31776/ 2012-02-16T00:00:00Z Empirical studies in spatial economics have shown that agglomeration economies may be a source of the uneven distribution of economic activities and economic growth across cities and regions. Both localization and urbanization economies are hypothesized to foster agglomeration and growth, but recent meta-analyses of this burgeoning body of empirical research show that the results are ambiguous. Recent overviews show that this ambiguity is fuelled by measurement issues and heterogeneity in terms of scale of time and space, aggregation, growth definitions, and the functional form of the models applied. Alternatively, in this paper, we argue that ambiguity may be due to a lack of research on firm-level performance in agglomerations. This research is necessary because the theories that underlie agglomeration economies are microeconomic in nature. Hierarchical or multilevel modeling, which allows micro levels and macro levels to be modeled simultaneously, is becoming an increasingly common practice in the social sciences. As illustrated by detailed Dutch data on firm-level productivity, employment growth and firm survival, we argue that these approaches are also suitable for reducing the ambiguity surrounding the agglomeration-firm performance relationship and for addressing spatial, sectoral and cross-level heterogeneity. Oort, F.G. van Burger, M.J. Knoben, J. Raspe, O. http://repub.eur.nl/res/pub/31775/ 2012-02-07T00:00:00Z We formulate a simple model of optimal defensive disclosure by a monopolist facing uncertain antitrust enforcement and test its implications using unique data on defensive disclosures and patents by IBM during 1955-1989. Our results indicate that stronger antitrust enforcement leads to more defensive disclosure, that quality inventions are disclosed defensively, and that defensive disclosure served as an alternative but less successful mechanism to patenting at IBM in appropriating returns from R&D. Bhaskarabhatla, A. Pennings, H.P.G. http://repub.eur.nl/res/pub/31778/ 2012-02-01T00:00:00Z This paper investigates the importance of speed for technical trading rule performance for three highly liquid ETFs listed on NASDAQ over the period January 6, 2009 up to September 30, 2009. In addition we examine the characteristics of market activity over the day and within subperiods corresponding to hours, minutes, and seconds. Speed has a clear impact on the return of technical trading rules. For strategies that yield a positive return when they experience no delay, a delay of 200 milliseconds is enough to lower performance significantly. On low volatility days this is already the case for delays larger than 50 milliseconds. In addition, the importance of speed for trading rule performance increases over time. Market activity follows a U-shape over the day with a spike at 10:00AM due to macroeconomic announcements and is characterized by periodic activity within the day, hour, minute, and second. Scholtus, M.L. Dijk, D.J.C. van http://repub.eur.nl/res/pub/30685/ 2011-12-15T00:00:00Z We propose a new and simple methodology to estimate the loss function associated with experts' forecasts. Under the assumption of conditional normality of the data and the forecast distribution, the asymmetry parameter of the lin-lin and linex loss function can easily be estimated using a linear regression. This regression also provides an estimate for potential systematic bias in the forecasts of the expert. The residuals of the regression are the input for a test for the validity of the normality assumption. We apply our approach to a large data set of SKU-level sales forecasts made by experts and we compare the outcomes with those for statistical model-based forecasts of the same sales data. We find substantial evidence for asymmetry in the loss functions of the experts, with underprediction penalized more than overprediction. Franses, Ph.H.B.F. Legerstee, R. Paap, R. http://repub.eur.nl/res/pub/30684/ 2011-11-30T00:00:00Z We propose a multivariate combination approach to prediction based on a distributional state space representation of the weights belonging to a set of Bayesian predictive densities which have been obtained from alternative models. Several specifications of multivariate time-varying weights are introduced with a particular focus on weight dynamics driven by the past performance of the predictive densities and the use of learning mechanisms. In the proposed approach the model set can be incomplete, meaning that all models are individually misspecified. The approach is assessed using statistical and utility-based performance measures for evaluating density forecasts of US macroeconomic time series and surveys of stock market prices. For the macro series we find that incompleteness of the models is relatively large in the 70's, the beginning of the 80's and during the recent financial crisis; structural changes like the Great Moderation are empirically identified by our model combination and the predicted probabilities of recession accurately compare with the NBER business cycle dating. Model weights have substantial uncertainty attached and neglecting this may seriously affect results. With respect to returns of the S&P 500 series, we find that an investment strategy using a combination of predictions from professional forecasters and from a white noise model puts more weight on the white noise model in the beginning of the 90's and switches to giving more weight to the left tail of the professional forecasts during the start of the financial crisis around 2008. Billio, M. Casarin, R. Ravazzolo, F. Dijk, H.K. van http://repub.eur.nl/res/pub/30601/ 2011-11-24T00:00:00Z A rich literature in public administration has shown that public sector employees have stronger altruistic motivations than private sector employees. Recent economic theories stress the importance of mission preferences, and predict that altruistic people sort into the public sector when they subscribe to its mission. This paper uses data from a representative survey among more than 30.000 employees from 50 countries to test this prediction. Our results show that only those individuals who are willing to contribute to the welfare of others and, in addition, feel that by working in the public sector they contribute to a good cause are significantly more likely to work in the public sector. Our results are most pronounced for highly educated employees. Dur, R.A.J. Zoutenbier, R. http://repub.eur.nl/res/pub/26865/ 2011-11-07T00:00:00Z For refuse collection, we estimate the cost effects of different institutional modes using panel data for almost all Dutch municipalities between 1998 and 2010. The modes we consider are private contracts, intermunicipal cooperation, public provision and own collection. For private companies, the cost advantage is substantially smaller and non-significant if municipal fixed effects are included. The cost advantage of intermunicipal cooperation is larger in this case than that of privatisation. Moreover, if yearly mode dummies and mode duration are also included, we show that for 2004, 2005 and 2006 a large cost increase is visible for privatisation. Which mode offers the most cost-saving opportunity depends strongly on the year and the mode duration. For private contracts, the duration effects lead to lower costs; for municipal cooperation and public provision, there are extra costs to begin with, which disappear after 5 or 6 years. Dijkgraaf, E. Gradus, R.H.J.M. http://repub.eur.nl/res/pub/30602/ 2011-11-01T00:00:00Z Public providers have no financial incentive to respect their legal obligation to exempt the poor from user fees. Health Equity Funds (HEFs) aim to make exemptions effective by giving NGOs responsibility for assessing eligibility and compensating providers for lost revenue. We use the geographic spread of HEFs in Cambodia to identify their impact on out-of-pocket (OOP) payments. Among households with some OOP payment, HEFs reduce the amount by 29%, on average. The effect is larger for households that are poorer, mainly use public health care and live closer to a district hospital. HEFs are more effective in reducing OOP payments when they are operated by a NGO, rather than the government, and when they operate in conjunction with the contracting of public health services. HEFs reduce households' health-related debt by around 25%, on average. There is no significant impact on non-medical consumption and health care utilisation. Flores, G. Por, I. Men, C.R. O'Donnell, O.A. Doorslaer, E.K.A. van http://repub.eur.nl/res/pub/26793/ 2011-10-28T00:00:00Z We examine the impact of mobile telephone use on economic development of individual households. Unique cross-sectional data were collected in personal interviews with heads of households (N=196) in Uganda. Economic development is measured at the household level by the Progress out of Poverty Index. We find strong support that mobile phone use positively impacts economic development. Blauw, S.L. Franses, Ph.H.B.F. http://repub.eur.nl/res/pub/26792/ 2011-10-14T00:00:00Z Using a unique dataset collected through a well-established survey, which was carried out in China, we examine whether Chinese individuals are prone to money illusion. In contrast to the outcomes for US individuals, we find that the Chinese are more likely to base decisions on the real monetary value of economic transactions. We put these observed differences in findings in perspective by comparing the economic conditions in the US and China. Mees, H. Franses, Ph.H.B.F. http://repub.eur.nl/res/pub/26445/ 2011-10-06T00:00:00Z Economen benadrukken traditioneel het belang van financiële prikkels voor arbeidsmotivatie. De laatste jaren is er ook aandacht voor andere relevante motieven. Een van deze motieven is reciprociteit, wat betekent dat mensen vijandige en vriendelijke daden op overeenkomstige wijze beantwoorden. Reciprociteit impliceert dat werknemers bereid zijn een stapje harder te lopen wanneer werkgevers laten blijken dat ze om hun personeel geven. Het eerste gedeelte van dit proefschrift bestudeert theoretisch de interactie tussen financiële prikkels en de reciprociteit van werknemers. Ter illustratie, ik bepaal de optimale combinatie van vast loon en prestatieloon wanneer werknemers reciproque zijn. Daarnaast leid ik af dat wanneer werknemers gevoelig zijn voor de aandacht en erkenning van hun werkgever, het aantrekkelijker is om werknemers te motiveren door ze een promotie in het vooruitzicht te stellen, dan door ze individueel prestatieloon te geven. Analyse van GSOEP data laat zien dat er een positieve correlatie is tussen de mate waarin iemand reciproque is en de kans dat hij een promotie in het vooruitzicht heeft. Het tweede deel van het proefschrift beschrijft twee veldexperimenten die in een Nederlandse winkelketen uitgevoerd zijn. Beide experimenten testen voorspellingen van toernooitheorie. Het eerste experiment test hoe tussentijdse feedback de navolgende prestaties beïnvloedt. Het tweede experiment test voorspellingen over de invloed van ruis in de prestatiemaatstaf en de verdeling van prijzengeld in een eliminatietoernooi over twee ronden. Onze bevindingen komen grotendeels overeen met de voorspellingen. Non, J.A. http://repub.eur.nl/res/pub/26527/ 2011-10-01T00:00:00Z Ill-health can be expected to reduce employment and income. But are the effects sustained over time? Do they differ across the income distribution? And are there spillover effects on the employment and income of the spouse? We use matching combined with difference-in-differences to identify the causal effects of sudden illness, represented by acute hospitalisations, on employment and income up to six years after the health shock using linked Dutch hospital and tax register data. On average, an acute hospital admission lowers the employment probability by seven percentage points and results in a 5% loss of personal income (30% for those entering disability insurance) two years after the shock. There is no subsequent recovery in either employment or income. The distribution of ill-health contributes to income inequality: a health shock is both more likely to occur and to have a larger relative impact on employment and income at the bottom of the income distr ibution. There are large spillover effects: household income falls by 50% more than the income of the disabled person, and the employment probability of the spouse is reduced by 1.5 percentage points. The negative spousal employment effect is larger for male than for female spouses and in higher income households. Garcia-Gomez, P. Kippersluis, J.L.W. van O'Donnell, O.A. Doorslaer, E.K.A. van http://repub.eur.nl/res/pub/26791/ 2011-10-01T00:00:00Z This paper analyses the optimal combination of costly and costless messages that a Sender uses in a signaling game if he is able to choose among all equilibrium communication strategies. We provide a complete characterization of the equilibrium that maximizes the Sender's ex ante expected utility in case of uniformly distributed types and quadratic loss functions. First, the Sender often wants to avoid money burning by using the most informative cheap talk communication strategy. Second, if he does burn money, he avoids separation and only re-arranges the existing intervals of the most informative cheap talk equilibrium, possibly adding one extra interval. Money burning takes place in the second interval only. Karamychev, V.A. Visser, B. http://repub.eur.nl/res/pub/26863/ 2011-10-01T00:00:00Z This paper examines whether the Conference Board's Leading Economic Index (LEI) can be used for modeling and forecasting a more refined business cycle classification beyond the usual distinction between expansions and contractions. Univariate Markov-switching models for monthly coincident variables and the LEI show that a three regime model is more appropriate than a model with only two regimes. Interestingly, the third regime captures `severe recessions' contrasting the conventional view that the additional third regime represents a 'recovery' phase. This is confirmed by means of Markov-switching vector autoregressive models that allow for phase shifts between the cyclical regimes of LEI and industrial production. Results indicate that a three regime model with a severe recession phase describes the cyclical dynamics in these series better than a two regime model (with only recession and expansion regimes) and a three regime model with a recovery phase. T he timing of the third regime mostly corresponds with periods of substantial credit squeezes and dramatic increases in the default spread as in the recent recession of 2007-2009. These findings provide empirical evidence for the theory of 'financial accelerator'. The severe recession regime of the LEI leads that of IP by 6.5 months whereas for mild recessions this lead time increases to one year. Cakmakli, C. Paap, R. Dijk, D.J.C. van http://repub.eur.nl/res/pub/26864/ 2011-10-01T00:00:00Z We propose a method of measuring and decomposing inequity in health care utilisation that allows for heterogeneity in the use-need relationship. This makes explicit inequity that derives from unequal treatment response to variation in need, as well as that due to differential effects of non-need determinants. Under plausible conditions concerning heterogeneity in the use-need relationship and the distribution of need, existing methods that impose homogeneity will underestimate pro-rich inequity. This prediction is confirmed for four low-middle income Asian countries. Van de Poel, E. Doorslaer, E.K.A. van O'Donnell, O.A.