April 13, 2017

CSSRR Economics–April 13, 2017

Filed under: E. Working Papers,Economics — admin @ 3:35 pm

Centro De Estudios Monetarios Y Financieros [Madrid, Spain] Working Papers:

[1710] “Managers and Productivity Differences,” by Nezih Guner, Andrii Parkhomenko, Gustavo Ventura.


We document that for a group of high-income countries (i) mean earnings of managers tend to grow faster than for non managers over the life cycle; (ii) the earnings growth of managers relative to non managers over the life cycle is positively correlated with output per worker. We interpret this evidence through the lens of an equilibrium life-cycle, span-of-control model where managers invest in their skills. We parameterize this model with U.S. observations on managerial earnings, the size-distribution of plants and macroeconomic aggregates. We then quantify the relative importance of exogenous productivity differences, and the size-dependent distortions emphasized in the misallocation literature. Our fi?ndings indicate that such distortions are critical to generate the observed differences in the growth of relative managerial earnings across countries. Thus, observations on the relative earnings growth of managers become natural targets to discipline the level of distortions. Distortions that halve the growth of relative managerial earnings (a move from the U.S. to Italy in our data), lead to a reduction in managerial quality of 27% and to a reduction in output of about 7% ? more than half of the observed gap between the U.S. and Italy. We ?find that cross-country variation in distortions accounts for about 42% of the cross-country variation in output per worker gap with the U.S.


[1709] “Testing Distributional Assumptions Using a Continuum of Moments,” by Dante Amengual, Marine Carrasco, and Enrique Sentana.


We propose specification tests for parametric distributions that compare theoretical and empirical characteristic functions. Our proposal is the continuum of moment conditions analogue to the usual overidentifying restrictions test, which takes into account the correlation between influence functions for different argument values. We derive its asymptotic distribution for fixed regularization parameter and when this vanishes with the sample size. We show its consistency against any deviation from the null, study its local power and compare it with existing tests. An extensive Monte Carlo exercise confirms that our proposed tests display good power in finite samples against a variety of alternatives.


[1708] “Normality Tests for Latent Variables,” by Tincho Almuzara, Dante Amengual, and Enrique Sentana.


We exploit the rationale behind the Expectation Maximization algorithm to derive simple to implement and interpret score tests of normality in the innovations to the latent variables in state space models against generalized hyperbolic alternatives, including symmetric and asymmetric Student ts. We decompose our tests into third and fourth moment components, and obtain one-sided likelihood ratio analogues, whose asymptotic distribution we provide. When we apply them to a cointegrated dynamic factor model which combines the expenditure and income versions of US aggregate real output to improve its measurement, we reject normality if the sample period extends beyond the Great Moderation.



Inter-American Development Bank Working Paper:


NEW: No. 786 “Skill Premium, Labor Supply and Changes in the Structure of Wages in Latin America,” by Manuel Fernandex and Julian Messina.

No. 792 “Ageing Poorly? Accounting for the Decline in Earnings Inequality in Brazil, 1995-2012,” by Francisco H.G. Ferreira, Sergio P. Firpo, and Julian Messina

No. 778 “In-Firm Training, Innovation and Productivity: The Case of Caribbean Small Island Developing States,” by Preeya Mohan, Eric Strobl, and Patrick Watson.

No. 777 “Stylized Facts about the Quantity and Quality of Parental Time Investments on the Skill Formation of Their Children,” by Javier Torres and Jorge M. Aguero.

No. 771 “Capital Requirements, Risk-Taking and Welfare in a Growing Economy,” by Pierre-Richard AgĂ©nor and Luiz A. Pereira da Silva.


World Bank Policy Research Programme: WBPR has recently released several new working papers. See the list at:


New papers are: WPS No. 8020-8027.

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