The Productivity Advantages of Large Cities: Distinguishing Agglomeration From Firm Selection

Firms are more productive, on average, in larger cities. Two main explanations have been offered: firm selection (larger cities toughen competition, allowing only the most productive to survive) and agglomeration economies (larger cities promote interactions that increase productivity), possibly reinforced by localized natural advantage. To distinguish between them, we nest a generalized version of a tractable firm selection model and a standard model of agglomeration. Stronger selection in larger cities left‐truncates the productivity distribution, whereas stronger agglomeration right‐shifts and dilates the distribution. Using this prediction, French establishment‐level data, and a new quantile approach, we show that firm selection cannot explain spatial productivity differences. This result holds across sectors, city size thresholds, establishment samples, and area definitions.     

Nonignorable Attrition in Multi-Period Panels With Refreshment Samples

In panel surveys, some observation units drop out before the end of the observation period. This panel attrition should not be ignored if it is related to the variables of interest. Hirano, Imbens, Ridder, and Rubin proposed the additively nonignorable (AN) attrition model to correct for the potential selectivity of the attrition in panels with two periods. If a refreshment sample is available in the second period, their model nonparametrically just-identifies the population distribution and the observation probability. We propose the sequential additively nonignorable attrition model that just-identifies the population distribution and the sequence of observation hazards for panels with more than two periods.     

Markov chain importance sampling with applications to rare event probability estimation

We present a versatile Monte Carlo method for estimating multidimensional integrals, with applications to rare-event probability estimation. The method fuses two distinct and popular Monte Carlo simulation methods—Markov chain Monte Carlo and importance sampling—into a single algorithm. We show that for some applied numerical examples the proposed Markov Chain importance sampling algorithm performs better than methods based solely on importance sampling or MCMC.     

Pathways of Black immigrant youth in Québec from secondary school to university: Cumulative racial disadvantage and compensatory advantage of resilience

This article analyzes the educational pathways of Black Canadian immigrant students in Québec with Sub-Saharan African and Caribbean backgrounds. Both racialized groups have been targets of educational and social discrimination and segregation, which compromise their educational pathways. The results obtained from the longitudinal data however, show that some of these students are able to overcome such obstacles. Although they are more susceptible to experiencing major academic difficulties and lag due to grade repetition, and less likely to attend private institutions or to be admitted to enriched programs in public schools, these students have access to college in a proportion comparable to that of their peers whose parents are non-immigrants. This supports the hypothesis of resilience put forward by some authors such as Krahn and Taylor (2005) regarding Canadian students from Sub-Saharan African and Caribbean immigrant families. However, the situation is somewhat reversed with regard to obtaining a college diploma and access to university. They are less likely to have entered university and obtained a postsecondary diploma 10 years after entering secondary school. From this perspective, the resilience hypothesis should be nuanced. In short, their educational pathways are characterized by a dynamic of interaction between the cumulative disadvantage of belonging to a racialized minority and the compensatory benefit of resilience.     

BIDDING FOR HORIZONTAL MULTINATIONALS

We present a model in which governments bid for firms by taxing/subsidizing setup costs. Firms choose both the number and the location of the plants they operate, and the equilibrium industry structure is affected by governments' subsidy choices. We show that the endogenous presence of horizontal multinationals attenuates the race to the bottom and yields some results that run counter to traditional findings in the literature. First, in the presence of multinationals, increasing subsidies decrease firms' profits by exacerbating price competition due to more firms going multinational. Second, instead of being always subsidized, firms may actually be taxed in equilibrium. Last, subsidies may become strategically independent policy instruments, instead of being strategic complements. (JEL: F12, F23, H27, H73, R12)     

RELATIVE RISK AVERSION IS CONSTANT: EVIDENCE FROM PANEL DATA

Most classical tests of constant relative risk aversion (CRRA) based on individual portfolio composition use cross‐sectional data. Such tests must assume that the distributions of wealth and preferences are independent. We use panel data to analyze how individuals’ portfolio allocation between risky and riskless assets varies in response to changes in total financial wealth. We find the elasticity of the risky asset share to wealth to be small and statistically insignificant, supporting the CRRA assumption; this finding is robust when the sample is restricted to households experiencing large income variations. In addition, we find a small but significant negative correlation between wealth and risk aversion. Various extensions are discussed.     

The Dynamics of Inequality

The past forty years have seen a rapid rise in top income inequality in the United States. While there is a large number of existing theories of the Pareto tail of the long‐run income distributions, almost none of these address the fast rise in top inequality observed in the data. We show that standard theories, which build on a random growth mechanism, generate transition dynamics that are too slow relative to those observed in the data. We then suggest two parsimonious deviations from the canonical model that can explain such changes: “scale dependence” that may arise from changes in skill prices, and “type dependence,” that is, the presence of some “high‐growth types.” These deviations are consistent with theories in which the increase in top income inequality is driven by the rise of “superstar” entrepreneurs or managers.     

DO PRICES TRANSMIT RATIONALLY EXPECTED INFORMATION?

A simple model with asymmetric information, in which inventory holders or traders submit demand curves to an auctioneer, has a unique partially revealing equilibrium. We wonder whether the agents can plausibly coordinate on this equilibrium through “eductive” reasoning relying on common knowledge. The analysis stresses the role of two effects, sensitivity and amplification, whose product should be small enough. The property is obtained whenever the equilibrium excess demand is steep enough, i.e., when the search for information does not distort demand too much. Neither the influence of the number of informed agents nor that of noise trading are monotonic. Real‐time learning has strikingly different features. (JEL: D82, D84)