SMUGGLING HUMANS: A THEORY OF DEBT‐FINANCED MIGRATION

We introduce financial constraints in a theoretical analysis of illegal immigration. Intermediaries finance the migration costs of wealth‐constrained migrants, who enter temporary servitude contracts to repay the debt. These debt/labor contracts are easier to enforce in the illegal than in the legal sector of the host country. Hence, when moving from the illegal to the legal sector becomes more costly—for instance, because of stricter deportation policies—fewer immigrants default on debt. This reduces the risks for intermediaries, who are then more willing to finance illegal migration. Stricter deportation policies may thus, ex ante, increase rather than decrease the flow of illegal migrants. Furthermore, stricter deportation policies worsen the skill composition of immigrants. While stricter border controls decrease overall immigration, they may result in an increase of debt‐financed migration. We also show that there are complementarities between employer sanctions and deportation policies. We use available evidence to check the empirical consistency of the theory. (JEL: J61, K42, O17)     

Random Effects Estimators with many Instrumental Variables

In this paper we propose a new estimator for a model with one endogenous regressor and many instrumental variables. Our motivation comes from the recent literature on the poor properties of standard instrumental variables estimators when the instrumental variables are weakly correlated with the endogenous regressor. Our proposed estimator puts a random coefficients structure on the relation between the endogenous regressor and the instruments. The variance of the random coefficients is modelled as an unknown parameter. In addition to proposing a new estimator, our analysis yields new insights into the properties of the standard two‐stage least squares (TSLS) and limited‐information maximum likelihood (LIML) estimators in the case with many weak instruments. We show that in some interesting cases, TSLS and LIML can be approximated by maximizing the random effects likelihood subject to particular constraints. We show that statistics based on comparisons of the unconstrained estimates of these parameters to the implicit TSLS and LIML restrictions can be used to identify settings when standard large sample approximations to the distributions of TSLS and LIML are likely to perform poorly. We also show that with many weak instruments, LIML confidence intervals are likely to have under‐coverage, even though its finite sample distribution is approximately centered at the true value of the parameter. In an application with real data and simulations around this data set, the proposed estimator performs markedly better than TSLS and LIML, both in terms of coverage rate and in terms of risk.     

Confidence Intervals for Partially Identified Parameters

Recently a growing body of research has studied inference in settings where parameters of interest are partially identified. In many cases the parameter is real‐valued and the identification region is an interval whose lower and upper bounds may be estimated from sample data. For this case confidence intervals (CIs) have been proposed that cover the entire identification region with fixed probability. Here, we introduce a conceptually different type of confidence interval. Rather than cover the entire identification region with fixed probability, we propose CIs that asymptotically cover the true value of the parameter with this probability. However, the exact coverage probabilities of the simplest version of our new CIs do not converge to their nominal values uniformly across different values for the width of the identification region. To avoid the problems associated with this, we modify the proposed CI to ensure that its exact coverage probabilities do converge uniformly to their nominal values. We motivate this modified CI through exact results for the Gaussian case.     

Strategic Inventory and Supply Chain Behavior

Based on a serial supply chain model with two periods and price‐sensitive demand, we present the first experimental test of the effect of strategic inventories on supply chain performance. In theory, if holding costs are sufficiently low, the buyer builds up a strategic inventory (even if no operational reasons for stock‐holding exist) to limit the supplier's market power, and to increase the own profit share. As it turns out, this enhances the overall supply chain performance. The supplier anticipates the effect of the strategic inventory and differentiates prices to capture a part of the increased supply chain profits. Our results show that the positive effects of strategic inventories are even more pronounced than theoretically predicted, because strategic inventories empower buyers by shifting the perception of the fair split. Overall, strategic inventories have a double positive effect, a strategic and a behavioral, both reducing the average wholesale prices and dampening the double marginalization effect. The latter effect leads to more equitable payoffs.     

Repossession through sharing of and access to seeds: different cases and practices

Seeds are both the means and product of agricultural production. The corporate appropriation of seeds affects farmers’ autonomy and has been contested and resisted by farmers worldwide through practices of repossession. This article investigates different practices of the repossession of seeds emphasising the micro-structure and recent developments in agricultural practices that lead to a commonisation of seeds. Various practices of seed repossession present in India are analysed and compared with open-source initiatives to present examples of the diversity of singular initiatives aimed at the commonisation of seeds in the Global South. The article shows that each initiative applies a multitude of concrete practices to counter what we will refer to as metabolic rift, but without a single generic strategy, each seeking in its own way to repossess seeds and (re)locate them in a social space of commons.     

Do smart parents raise smart children? The intergenerational transmission of cognitive abilities

Complementing prior research on income and educational mobility, we examine the intergenerational transmission of cognitive abilities. We find that individuals’ cognitive skills are positively related to their parents’ abilities, despite controlling for educational attainment and family background. Differentiating between mothers’ and fathers’ IQ transmission, we find different effects on the cognition of sons and daughters. Cognitive skills that are based on past learning are more strongly transmitted between generations than skills that are related to innate abilities. Our findings are not compatible with a pure genetic model but rather point to the importance of parental investments for children’s cognitive outcomes.     

Rational behaviour: A comparison between the theory stemming from de Finetti's work and some other leading theories

We present some interesting features of de Finetti's decision theory; then we extended the theory. The extended theory has a normative character and is of the expected utility kind, but it is also very adaptable. By comparing it with some leading theories, we find that our theory is compatible with consideration of the whole probability distribution — it can even accommodate Allais' paradox -, while it is not generally compatible with probability weighting. We are mainly interested in the normative point of view.     

WHY DO EMERGING ECONOMIES BORROW SHORT TERM?

We argue that one reason why emerging economies borrow short term is that it is cheaper than borrowing long term. This is especially the case during crises, as during these episodes the relative cost of long‐term borrowing increases. We construct a unique database of sovereign bond prices, returns, and issuances at different maturities for 11 emerging economies from 1990 to 2009 and present a set of new stylized facts. On average, these countries pay a higher risk premium on long‐term than on short‐term bonds. During crises, the difference between the two risk premia increases and issuance shifts towards shorter maturities. To illustrate our argument, we present a simple model in which the maturity structure is the outcome of a risk‐sharing problem between an emerging economy subject to rollover crises and risk‐averse international investors.