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Working Paper
Is obesity contagious?: social networks vs. environmental factors in the obesity epidemic
This note?s aim is to investigate the sensitivity of Christakis and Fowler?s claim (NEJM July 26, 2007) that obesity has spread through social networks. It is well known in the economics literature that failure to include contextual effects can lead to spurious inference on ?social network effects.? We replicate the NEJM results using their specification and a complementary dataset. We find that point estimates of the ?social network effect? are reduced and become statistically indistinguishable from zero once standard econometric techniques are implemented. We further note the presence of ...
Working Paper
Model uncertainty and the deterrent effect of capital punishment
The reintroduction of capital punishment after the end of the Supreme Court moratorium has permitted researchers to employ state level heterogeneity in the use of capital punishment to study deterrent effects. However, no scholarly consensus exists as to their magnitude. A key reason this has occurred is that the use of alternative models across studies produces differing estimates of the deterrent effect. Because differences across models are not well motivated by theory, the deterrence literature is plagued by model uncertainty. We argue that the analysis of deterrent effects should ...
Working Paper
Looking behind the aggregates: a reply to “Facts and Myths about the Financial Crisis of 2008”
As Chari et al (2008) point out in a recent paper, aggregate trends are very hard to interpret. They examine four common claims about the impact of financial sector phenomena on the economy and conclude that all four claims are myths. We argue that to evaluate these popular claims, one needs to look at the underlying composition of financial aggregates. Our findings show that most of the commonly argued facts are indeed supported by disaggregated data.
Working Paper
Unpacking social interactions
As empirical work in identifying social effects becomes more prevalent, researchers are beginning to struggle with identifying the composition of social interactions within any given reference group. In this paper, we present a simple econometric methodology for the separate identification of multiple social interactions. The setting under which we achieve separation is special, but is likely to be appropriate in many applications.
Working Paper
Asset liquidity, debt valuation and credit risk
This paper presents a structural debt valuation model that links default probabilities and recovery rates of corporate securities to asset market liquidity. This linking is advantageous for risk management and regulation of financial institutions in that it provides a method of calibrating the relationship between probability of default (PD) and loss given default (LGD). Two innovations in the paper are the placing of the default point in a model of debt valuation into general equilibrium and conditioning this point on market factors such as asset liquidity. These allow one to derive ...
Working Paper
The option value of consumer bankruptcy
This paper aims to contribute to the growing literature on the causes of consumer bankruptcy. It presents the consumer bankruptcy decision as an irreversible choice that has an embedded real option value. This allows the use of well known framework for the study of decision making under uncertainty. The principal empirical finding is that cross-sectional variances of economic factors, such as unemployment, are strong predictors of bankruptcy rates and are consistent with the implications of the real options model. This supports anecdotal evidence that individuals are facing increased economic ...
Working Paper
Loss distribution estimation, external data and model averaging
This paper will discuss a proposed method for the estimation of loss distribution using information from a combination of internally derived data and data from external sources. The relevant context for this analysis is the estimation of operational loss distributions used in the calculation of capital adequacy. We present a robust, easy-to-implement approach that draws on Bayesian inferential methods. The principal intuition behind the method is to let the data itself determine how they should be incorporated into the loss distribution. This approach avoids the pitfalls of managerial choice ...
Working Paper
Demonstration effects in preventive care
Using a unique dataset composed of female employees at a large medical organization, this paper explores the role of social interactions among female co-workers and neighbors in the decision to obtain breast cancer screening exams. In our theoretical framework, the experience of other women is salient because it alters the tolerance for ambiguity about their own vulnerability, via a comparative ignorance effect. We find that the social multiplier ranges from 2 to 3: the equilibrium effect of an exogenous shock that impacts the probability of performing a mammogram is two to three times the ...
Working Paper
Household bankruptcy decision: the role of social stigma vs. information sharing
Using a large sample of individual credit information provided by a US credit bureau, this paper investigates the empirical relevance of stigma and information sharing on household bankruptcy and its trend. Many observers of bankruptcy patterns have conjectured that there exists an increased willingness to default that reflects a diminution of social stigma. In this paper, we use a new methodology to disentangle stigma and social learning?two acknowledgedly important social factors affecting default. Although our results indicate a large and important role for stigma, changes in information ...
Working Paper
Forgive and forget: who gets credit after bankruptcy and why?
Conventional wisdom about individuals who have gone bankrupt is that they find it very difficult to get credit for at least some time after their bankruptcy. However, there is very little non-survey based empirical evidence on the availability of credit post-bankruptcy. This paper makes two contributions using data from one of the largest credit bureaus in the US. First, we show that individuals who file for bankruptcy can indeed get credit very quickly after they file. Indeed, 90% of individuals have access to some sort of credit within the 18 months after filing for bankruptcy, and 66% have ...