Research

Abstract: Limited access to reliable financial instruments makes it difficult for rural households to manage daily cash flows. Selling goods through cooperatives can improve savings, but cooperative income is not easily accessible when facing an emergency. Cash-constrained households may therefore side-sell in local markets that pay on the spot, while insurance could reduce the need to side-sell. We test these hypotheses using panel data for farmers from two Kenyan dairy cooperatives. Both cooperatives pay only once a month, with local market vendors paying a lower price but upon delivery. We find that farmers sell less milk to the cooperatives when facing uninsured health emergencies or when cash on hand is low. Health insurance reduces side-selling. These findings highlight that selling, saving and risk-coping decisions are intertwined, with side-selling providing a strategy to manage temporary cash constraints. This suggests that linking agricultural and insurance contracts can enhance cooperatives’ financial sustainability. 

Abstract: This paper studies a partially linear seemingly unrelated regressions (SUR) model to estimate a translog cost system that consists of a partially linear translog cost function and input share equations. The parametric component is estimated via a simple two-step feasible SUR estimation procedure. We show that the resulting estimator achieves root-$n$ convergence and is asymptotically normal. The nonparametric component is estimated with a nonparametric SUR estimator based on the Cholesky decomposition. We show that this estimator is consistent, asymptotically normal, and more efficient relative to the ones that ignore cross-equation correlation. A model specification test for parametric functional form is proposed. An Italian banking data set is used to estimate the translog cost system. Results show that marginal effects of risks on cost of production are heterogeneous, but increase with risk levels.

Abstract:  We propose kernel-based estimators for both the parametric and nonparametric components of a partially linear additive regression model where a subset of the covariates entering the nonparametric component are generated by the estimation of an auxiliary nonparametric regression. Both estimators are shown to be asymptotically normally distributed. The estimator for the finite dimensional parameter is shown to converge at the parametric √n rate and the estimator for the infinite dimensional parameter converges at a slower nonparametric rate that, as usual, depends on the rate of decay of the bandwidths and the dimensionality of the underlying regression. A small Monte Carlo study is conducted to shed light on the finite sample performance of our estimators and to contrast them with those of estimators available in the extant literature.

Abstract: The association between foreign aid and growth has been controversial for decades and the evidence is quite mixed with results sensitive to data samples and modelling approaches. We reassess the relationship between aid, policy and growth implementing a novel semiparametric estimation method that allows for nonlinearities and controls for endogeneity. The results show that the aid-policy-growth relationship is complex. Aid inflows do not seem growth-enhancing, except at very high levels (above 7% of Aid/GDP), whereas the effect may arrive with a lag at lower levels. Policy improvements are positively correlated with growth at high policy levels (above the median value) but better policies do not increase aid effectiveness.

Abstract: This paper studies the analytic gradient of the local-constant estimator for the semiparametric smooth coefficient (SPSC) model. This gradient estimator is shown to be consistent and asymptotically normal. A gradient-based cross-validation method for bandwidth selection is proposed for the SPSC model. Simulation suggests that the analytic gradient of the local-constant estimator outperforms the local linear counterpart with a relatively large sample size. The gradient estimators are then applied to estimate the marginal effects of research and development on capital and labor productivity in China’s high-technology industry.

Abstract: Health insurance can improve health-seeking behaviors and protect consumption from health shocks but may also crowd out informal insurance. This paper therefore examines whether impacts of health insurance depend on households’ access to informal insurance, as proxied for by mobile money usage. Based on high-frequency financial diaries data collected in rural Kenya, we find that households with weaker access to informal insurance cope with uninsured health shocks by lowering subsequent non-health expenditures by approximately 25 percent. These same households are able to smooth consumption when health shocks are insured, due to lower out-of-pocket health expenditures. In contrast, households with access to informal insurance are able to smooth consumption even in the absence of formal health insurance. For this latter group, health insurance increases healthcare utilization at formal clinics and does not crowd out gifts and remittances during weeks with health shocks. These findings provide guidance for insurance schemes aiming to target the most vulnerable populations.

Abstract: This paper considers the estimation of a system of nonparametric dynamic regressions with error covariance that accommodates both contemporaneous and inter-temporal correlation.  First, using a pre-whitening transformation that assumes knowledge of the error covariance, we propose a two-step local-linear system estimator that is asymptotically normal under certain mixing conditions.  In addition, the system estimator is asymptotically efficient relative to the traditional local-linear estimator.  Second, under the additional assumption that the error covariance depends on a finite dimensional parameter, we establish that our system estimator constructed under knowledge of the true parameter and under a consistent estimator are asymptotically equivalent.  We show that several regression models in the existing literature are special cases of our structure.  These include, but are not limited to, nonparametric dynamic seemingly unrelated regressions and certain dynamic panel data regressions.

Abstract: This paper presents a general equilibrium model in which homogeneous individuals make occupational choices to be workers or entrepreneurs of different ability levels, and entrepreneurs choose a technology from a set of competing technologies and decide whether to export. In equilibrium, the interaction between individuals’ homogeneous ability levels, the characteristics of competing technologies, and international trade costs gives rise to firm heterogeneity in productivities. This paper tries to explain the response of non-exporters to trade liberalization in terms of technology adoption. Non-exporters would choose to downgrade their technology since they might not be able to afford the fixed cost of high technology due to the increased import competition and “tougher” environment caused by trade liberalization. Besides that, trade liberalization shrinks the skill premium for the low ability entrepreneurs relative to raw labor, while it increases the premium for the high ability entrepreneurs. Aggregate welfare and welfare for raw labor and high ability entrepreneurs are improved, leaving the change of welfare for low ability entrepreneurs unclear.