Discussion Paper No. 540
July 28, 2025
Mean Field Portfolio Games with Epstein-Zin Preferences
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Abstract:
We study mean field portfolio games under Epstein-Zin preferences, which naturally encompass the classical time-additive power utility as a special case. In a general non-Markovian framework, we establish a uniqueness result by proving a one-to-one correspondence between Nash equilibria and the solutions to a class of BSDEs. A key ingredient in our approach is a necessary stochastic maximum principle tailored to Epstein-Zin utility and a nonlinear transformation. In the deterministic setting, we further derive an explicit closed-form solution for the equilibrium investment and consumption policies.
Keywords:
epstein-zin utility; mean field game; stochastic maximum principle;
JEL-Classification:
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Discussion Paper No. 539
Measuring Long-Run Expectations that Correlate with Investment Decisions
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Abstract:
Different methods of eliciting long-run expectations yield data that predict economic choices differently well. We ask members of a wide population sample to make a 10-year investment decision and to forecast stock market returns in one of two formats: they either predict the average of annual growth rates over the next 10 years, or they predict the total, cumulative growth that occurs over the 10-year period. Results show that total 10-year forecasts are more pessimistic than average annual forecasts, but they better predict experimental portfolio choices and real-world stock market participation.
Keywords:
household finance; long-run predictions; survey experiments;
JEL-Classification:
D01; D14; D84; D9;
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Discussion Paper No. 538
Surplus Squeeze and Informational Hold-Up
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Abstract:
We study a static bilateral trade setting with moral hazard, where a seller privately chooses quality and a buyer may pay to verify it. We show that buyer-side information acquisition can lead to informational hold-up through a mechanism wecall surplus squeezing: precise verification enables the seller to extract all buyer surplus, deterring inspection and causing trade to unravel. When verification is noisy, uncertainty preserves buyer surplus and sustains trade. Our framework highlights how strategic responses to learning can distort investment incentives, offering a new perspective on the limits of information precision in mitigating moral hazard.
Keywords:
surplus squeeze; informational hold-up; buyer learning; costly information;
JEL-Classification:
D82; D83;
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Discussion Paper No. 537
Elite Persistence in Family: The Role of Adoption in Prewar Japan
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Abstract:
Why can elite families often maintain their social and economic status over multiple generations? We show that adoption can contribute to the persistence of elite status by utilizing a unique historical framework of prewar Japan. However, the preference for adopted heirs may lead to selection bias in the process of choosing heirs, potentially biasing OLS results negatively. To address this selection bias, we use the gender of the firstborn child as an instrument for the adoption decision. We find that having an adopted heir increases the probability of maintaining elite status in the son’s generation by 27% compared to having a biological heir. Furthermore, we show that this result is driven by matching high-quality adopted sons with fathers who were highly successful in their early lives.
Keywords:
intergenerational transmission; adoption; succession; family; elite;
JEL-Classification:
J12; J13; J62; N35;
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Discussion Paper No. 536
July 13, 2025
Out-of-School Learning: Subtitling vs. Dubbing and the Acquisition of Foreign-Language Skills
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The development of English-language skills, a near necessity in today’s global economy, is heavily influenced by historical national decisions about whether to subtitle or dub TV content. While prior studies of language acquisition have focused on schools, we show the overwhelming influence of out-of-school learning. We identify the causal effect of subtitling in a difference-in-differences specification that compares English to math skills in European countries that do and do not use subtitles. We find a large positive effect of subtitling on English-language skills of over one standard deviation. The effect is robust to accounting for linguistic similarity, economic incentives to learn English, and cultural protectiveness. Consistent with oral TV transmission, the effect is larger for listening and speaking skills than for reading.
Keywords:
language skills; english as a foreign language; tv; movies; dubbing; subtitles;
JEL-Classification:
I21; Z13; L82;
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Discussion Paper No. 535
The Production of Information to Price Discriminate
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Abstract:
We study price discrimination by a monopolistic seller that endogenously produces a market segmentation at a cost, and question the efficiency of the production of market segmentations led by private incentives. We show that the efficient market segmentation gives all the gains in total surplus to the buyer, and the seller profit stays at the uniform profit level. Our result suggests that the private production of information by sellers to price discriminate is significantly inefficient.
Keywords:
price discrimination; cost of information; production of information;
JEL-Classification:
D42; D83; L12;
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Discussion Paper No. 534
June 29, 2025
Paper Tiger? Chinese Science and Home Bias in Citations
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Abstract:
We investigate the phenomenon of home bias in scientific citations, where researchers disproportionately cite work from their own country. We develop a benchmark for expected citations based on the relative size of countries, defining home bias as deviations from this norm. Our findings reveal that China exhibits the largest home bias across all major countries and in nearly all scientific fields studied. This stands in contrast to the pattern of home bias for China’s trade in goods and services, where China does not stand out from most industrialized countries. After adjusting citation counts for home bias, we demonstrate that China’s apparent rise in citation rankings is overstated. Our adjusted ranking places China fourth globally, behind the US, the UK, and Germany, tempering the perception of China’s scientific dominance.
Keywords:
home bias; knowledge flows; citation patterns; china; science;
JEL-Classification:
F14; F6; F15; O3; O33;
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Discussion Paper No. 533
June 2, 2025
Multidimensional Skills on LinkedIn Profiles: Measuring Human Capital and the Gender Skill Gap
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Abstract:
We measure human capital using the self-reported skill sets of nearly 9 million U.S. college graduates from professional profiles on LinkedIn. We aggregate skill strings into 48 clusters of general, occupation-specific, and managerial skills. Multidimensional skills can account for several important labor-market patterns. First, the number and composition of skills are systematically related to measures of human-capital investment such as education and work experience. The number of skills increases with experience, and the average age-skill profile closely resembles the well-established concave age-earnings profile. Second, workers who report more skills, especially specific and managerial ones, hold higher-paid jobs. Skill differences account for more earnings variation than detailed measures of education and experience. Third, we document a sizable gender gap in skills. While women and men report nearly equal numbers of skills shortly after college graduation, women’s skill count increases more slowly with age subsequently. A simple quantitative exercise shows that women’s slower skill accumulation can be fully accounted for by reduced work hours associated with motherhood. The resulting gender differences in skills rationalize a substantial proportion of the gender gap in job-based earnings.
Keywords:
skills; human capital; gender; education; experience; social media; online professional network; labor market; tasks; earnings;
JEL-Classification:
I26; J16; J24; J31;
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Discussion Paper No. 532
April 29, 2025
Behavioral Measures Improve AI Hiring: A Field Experiment
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The adoption of Artificial Intelligence (AI) for hiring processes is often impeded by a scarcity of comprehensive employee data. We hypothesize that the inclusion of behavioral measures elicited from applicants can enhance the predictive accuracy of AI in hiring. We study this hypothesis in the context of microfinance loan officers. Our findings suggest that survey-based behavioral measures markedly improve the predictions of a random-forest algorithm trained to predict productivity within sample relative to demographic information alone. We then validate the algorithm’s robustness to the selectivity of the training sample and potential strategic responses by applicants by running two out-of-sample tests: one forecasting the future performance of novice employees, and another with a field experiment on hiring. Both tests corroborate the effectiveness of incorporating behavioral data to predict performance. The comparison of workers hired by the algorithm with those hired by human managers in the field experiment reveals that algorithmic hiring is marginally more efficient than managerial hiring.
Keywords:
hiring; ai; economic and behavioral measures; selective labels;
JEL-Classification:
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Discussion Paper No. 531
April 27, 2025
Cooperation in the Workplace
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Abstract:
Organizations rely on peer-to-peer knowledge exchange among employees, yet incentivizing cooperative behaviors is a challenge. This study evaluates an intervention designed to encourage peer support in the largest bank in Uganda. Using a cluster randomized controlled trial, we introduced a public recognition incentive-awarding employees identified as the most supportive by their peers and supervisors. The intervention increases employees' willingness to help by 21% in expertise-sharing and 12% in mentoring. The incentive's effectiveness stems from its role in enhancing professional reputation and career prospects. A replication exercise in a second bank confirms the findings and the external validity of the results.
Keywords:
workplace cooperation; peer recognition; organizational incentives; knowledge sharing; field experiment; employee motivation; randomized controlled trial (RCT);
JEL-Classification:
M52; D23; J24; M54; C93; D83;