Economics Insights @ CBS

We propose a new three-pronged plan to address the recent harmful flood of foreclosures. Our plan would address the major barriers that inhibit the ability of third-party servicers to modify mortgages the way portfolio lenders are now doing with greater success. The plan provides greater compensation for servicers to perform their duties, removes legal constraints that inhibit modification, and addresses critical second liens that often get in the way of effective mortgage modifications.

This paper studies the effect of product market competition on the compensation packages that firms offer to their executives and in particular its impact on the sensitivity of pay to performance. To measure the effect of competition we use two different identification strategies on a panel of US executives. We exploit two deregulation episodes in the banking and financial sectors as quasi-natural experiments. We provide difference-in-differences estimates of the effect of competition on estimated performance-pay sensitivities and on the sensitivity of stock option grants.

Social commerce is an emerging trend in which online shops create referral hyperlinks to other shops in the same online marketplace. We study the evolution of a social commerce network in a large online marketplace. Our dataset starts before the birth of the network (at which points shops were not linked to each other) and includes the birth of the network. The network under study exhibits a typical power-law degree distribution. We empirically compare a set of edge formation mechanisms (including preferential attachment and triadic closure) that may explain the emergence of this property.

In this essay, I provide an overview of the scope and breadth of the field experiments in class size conducted prior to World War II, the motivations behind them, and how their experimental designs were crafted to deal with perceived sources of bias. I conclude with a discussion of how one might interpret the findings of these early experimental results alongside more recent research, and how research on class size has shifted towards using instrumental variables rather than field experiments to address the class size issue empirically.

The literature on the benefits and costs of financial globalization for developing countries has exploded in recent years, but along many disparate channels with a variety of apparently conflicting results. There is still little robust evidence of the growth benefits of broad capital account liberalization, but a number of recent papers in the finance literature report that equity market liberalizations do significantly boost growth.