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Recent QED Working Papers

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#1537.

Luke Rawling

Improving the Economic Integration of Canadian Immigrants

Immigrants tend to have substantially worse labour market outcomes than Canadian-born workers. This paper provides an overview of immigrants in the Canadian labour market, describing the key barriers that can arise when changing cultures and labour markets and that can hinder immigrants from realizing their economic potential. It then summarizes the efforts Canada has made to alleviate these barriers and highlights some persistent challenges going forward, such as the current state of foreign credential recognition (FCR) and cautioning against the rise of the two-step immigration scheme.…

#1536.

Maria Garcia-Osipendo, Nicholas Vreugdenhil, Nahim Bin Zahur

Endogenous Rigidities and Capital Misallocation: Evidence from Containerships

We investigate how endogenous rigidities inhibit physical capital reallocation. We focus on the role of contract duration - a classic example of an adjustment rigidity. We argue when agents sign longer contracts in booms when markets are thin, they generate a contracting externality which further amplifies thinness and impedes the adjustment of markets to shocks. We develop a framework with booms and busts where agents search and choose match duration. Applying the framework to the containership leasing market, we find substantial misallocation from endogenous rigidities, particularly in…

#1535.

Stelios Arvanitis

Frequentist Model Averaging with Nash Bargaining: A Stochastic Dominance Approach

Within the Frequentist Model Averaging framework for linear models, we introduce a multi-objective model averaging methodology that extends both the generalized Jackknife Model Averaging (JMA) and the Mallows Model Averaging (MMA) criteria. Our approach constructs estimators based on stochastic dominance principles and explores averaging methods that minimize multiple scalarizations of the joint criterion integrating MMA and JMA. Additionally, we propose an estimator that can be interpreted as a Nash bargaining solution between the competing scalar criteria. We establish the asymptotic…

#1534.

Stelios Arvanitis

Universal Choice Spaces and Expected Utility: A Banach-type Functorial Fixed Point

This paper utilizes a Banach-type fixed point theorem in a functorial context to develop Universal Choice Spaces for addressing decision problems, focusing on expected utility and preference uncertainty. This generates an infinite sequence of optimal selection problems involving probability measures on utility sets. Each solution at a given stage addresses the preference ambiguity from the previous stage, enabling optimal choices at that level. The Universal Choice Space is characterized as a collection of finite-dimensional vectors of probability distributions, with the mth component…

#1533.

Stelios Arvanitis

Norm Constrained Empirical Portfolio Optimization with Stochastic Dominance: Robust Optimization Non-Asymptotics

The present note provides an initial theoretical explanation of the way norm regularizations may provide a means of controlling the non-asymptotic probability of False Dominance classification for empirically optimal portfolios satisfying empirical Stochastic Dominance restrictions in an iid setting. It does so via a dual characterization of the norm-constrained problem, as a problem of Distributional Robust Optimization. This enables the use of concentration inequalities involving the Wasserstein distance from the empirical distribution, to obtain an upper bound for the non-asymptotic…

#1532.

Stelios Arvanitis

Sparse spanning portfolios and under-diversification with second-order stochastic dominance

We develop and implement methods for determining whether relaxing sparsity constraints on portfolios improves the investment opportunity set for risk-averse investors.We formulate a new estimation procedure for sparse second-order stochastic spanning based on a greedy algorithm and Linear Programming. We show the optimal recovery of the sparse solution asymptotically whether spanning holds or not. From large equity datasets, we estimate the expected utility loss due to possible under-diversification, and find that there is no benefit from expanding a sparse opportunity set beyond 45 assets…

#1531.

Charles Beach

Testing for Canadian Distributional Change: Declining Middle Class, Rising Top Income Shares and Widening Income Gaps

This paper combines quantile-based disaggregative statistics and standard error formulas for the statistics to examine changes in the distribution of individuals’ incomes in Canada within a standard statistical inference framework. Analysis focuses on decile means and income shares, Lorenz curves (as indicators of inequality change) and generalized Lorenz curves (as indicators of change in economic well-being). The analysis confirms major previous findings as highly statistically significant and reveals much new distributional detail. Significant and substantial…

#1530.

Charles Beach, Russell Davidson

Empirically Implementing a Social Welfare Inference Framework

This paper builds on recent econometric developments establishing distribution-free statistical inference methods for quantile means and income shares for a sample distribution of microdata to propose an approach to empirically Implement several dominance criteria for comparing economic well-being and general income inequality between distributions. It provides straightforward variance-covariance formulas in a set of practical empirical procedures for formally testing economic well-being and inequality comparisons such as rank dominance, Lorenz dominance and generalized Lorenz dominance…

#1529.

Christopher Cotton, Daniel Teeter

Breaking Down Canada’s Internal Trade Barriers

This paper provides an overview of Canada’s internal trade barriers that limit cross-province trade and competition. It summarizes the different types of barriers, how costly they are for consumers and the economy, recent efforts to reduce them, and why they persist. It then summarizes 22 reforms and investments that could be undertaken by Canadian provincial and federal governments to break down the barriers. The paper classifies these reforms into four categories and presents several strategies for incentivizing reform.