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#1427.

Brant Abbott, Robin Brace

Does Consumption Inequality Mirror Wealth Inequality in the Survey of Consumer Finances?

A method to impute consumption expenditure inequality between wealth groups in the Survey of
Consumer Finances is provided, allowing for measurement error that is correlated with income and wealth.
Identification is derived from observing food at home and food away from home, which are relative necessities
and luxuries, respectively. The gap in expenditure between top and bottom wealth quintiles is estimated to
have increased by 50% between 2004 and 2013, indicating that observed increases in wealth inequality have
passed through to consumption.…

#1426.

Christopher Cotton, jordan_naowski_wp, Ardyn Nordstrom, Eric Richert

Can Community Information Campaigns Improve Girls’ Education?

We examine the impact of a large, randomized Girls’ Education Challenge (GEC) project in rural Zimbabwe. The multifaceted project initially provided information about girls’ rights and education barriers to girls, parents, teachers, and others. Later, the project introduced a learn-to-read program and provided resources such as bicycles and books. The information campaign significantly improved mathematics performance and school enrolment in a short time frame. The subsequent provision of resources and curriculum changes corresponded to improvements in literacy but did not correspond to…

#1425.

Morten Ø. Nielsen, Antoine Noël

To infinity and beyond: Efficient computation of ARCH(\infty) models

This paper provides an exact algorithm for efficient computation of the time series of conditional variances, and hence the likelihood function, of models that have an ARCH($\infty$) representation. This class of models includes, e.g., the fractionally integrated generalized autoregressive conditional heteroskedasticity (FIGARCH) model. Our algorithm is a variation of the fast fractional difference algorithm of \cite{JensenNielsen2014}. It takes advantage of the fast Fourier transform (FFT) to achieve an order of magnitude improvement in computational speed. The efficiency of the algorithm…

#1424.

Charles Beach, Frank Milne

Ontario Post-Secondary Education Funding Policies: Perverse Incentives and Unintended Consequences

This paper offers some observations on the funding of post-secondary schools in Ontario and Canada more broadly. Specifically, it notes how limited public funding for domestic students has provided strong incentives for PSE schools to attract full fee-paying international students, whose numbers have risen dramatically in recent years in Canada. The result has been a rising financial exposure of such schools to sudden external funding shocks and an increasing risk to the overall quality and available curriculum of programs delivered to all students. The paper also comments on Ontario plans…

#1423.

collin_brown_workingpaper, Jonathan Chiu, Thorsten V. Koeppl

What Drives Bitcoin Fees? Using Segwit to Assess Bitcoin's Long-run Sustainability

We use block level data from the Bitcoin blockchain to estimate the impact of congestion and the USD price on average fee rates. The introduction and adoption of the Segwit protocol allows us to identify an aggregate demand curve for bitcoin transactions. We nd that Segwit has reduced fee revenue by about 80%. Fee revenue could be maximized at a blocksize of about 0.6 MB when Segwit adoption remains at 40%. At this blocksize, maximum fee revenue would be roughly 1/8 of the current block reward { or the equivalent of 1.6375 BTC as a reward in the long run given current prices and demand for…

#1422.

Jason Allen, Robert Clark, Brent R. Hickman, Eric Richert

Resolving Failed Banks: Uncertainty, Multiple Bidding & Auction Design

The FDIC resolves insolvent banks using an auction process in which bidding is multidimensional and the rule used to evaluate bids along the different dimensions is proprietary. Uncertainty about the scoring rule leads banks to simultaneously submit multiple differentiated bids. This resolution mechanism typically results in considerable losses for the FDIC—$90 billion during the crisis. Our objective is to see whether the mechanism could be improved. To do so, we propose a methodology for analyzing auction environments where bids are ranked according to multiple attributes chosen by…

#1421.

James G. MacKinnon, Matthew D. Webb

When and How to Deal With Clustered Errors in Regression Models

We discuss when and how to deal with possibly clustered errors in linear regression models. Specifically, we discuss situations in which a regression model may plausibly be treated as having error terms that are arbitrarily correlated within known clusters but uncorrelated across them. The methods we discuss include various covariance matrix estimators, possibly combined with various methods of obtaining critical values, several bootstrap procedures, and randomization inference. Special attention is given to models with few treated clusters and clusters that vary in size, where inference…

#1420.

Morten Ø. Nielsen, Won-Ki Seo, dkseong

Inference on the dimension of the nonstationary subspace in functional time series

We propose a statistical procedure to determine the dimension of the nonstationary subspace of cointegrated functional time series taking values in the Hilbert space of square-integrable functions defined on a compact interval. The procedure is based on sequential application of a proposed test for the dimension of the nonstationary subspace. To avoid estimation of the long-run covariance operator, our test is based on a variance ratio-type statistic. We derive the asymptotic null distribution and prove consistency of the test. Monte Carlo simulations show good performance of our test and…

#1419.

Charles Beach, working_paper_worswick

An Economic Model of the Distribution of Family Income in Canada

This paper develops an economic model of the distribution of income based on shares of family incomes in Canada over 1976 - 2016. Major determinants of quintile and decile shares of total and market income include male and female participation rates, unemployment rate, inflation rate, GDP growth rate and manufacturing-to-services employment ratio. The analysis tests the hypothesis of GDP growth neutrality ("a rising tide lifts all boats") and strongly rejects it. It also examines the distributional benefits and losses from automation and globalization, and…