Bayesian Analysis of Linear Inverse Problems with Applications in Economics and Finance

In my PhD thesis I propose a Bayesian nonparametric estimation method for structural econometric models where the functional parameter of interest describes the economic agent's behavior. The structural parameter is characterized as the solution of a functional equation, or by using more technical words, as the solution of an inverse problem that can be either ill-posed or well-posed. From a Bayesian point of view, the parameter of interest is a random function and the solution to the inference problem is the posterior distribution of this parameter. A regular version of the posterior distribution in functional spaces is characterized. However, the infinite dimension of the considered spaces causes a problem of non continuity of the solution and then a problem of inconsistency, from a frequentist point of view, of the posterior distribution (i.e. problem of ill-posedness). The contribution of this essay is to propose new methods to deal with this problem of ill-posedness. The first one consists in adopting a Tikhonov regularization scheme in the construction of the posterior distribution so that I end up with a new object that I call regularized posterior distribution and that I guess it is solution of the inverse problem. The second approach consists in specifying a prior distribution on the parameter of interest of the g-prior type. Then, I detect a class of models for which the prior distribution is able to correct for the ill-posedness also in infinite dimensional problems. I study asymptotic properties of these proposed solutions and I prove that, under some regularity condition satisfied by the true value of the parameter of interest, they are consistent in a "frequentist" sense. Once I have set the general theory, I apply my bayesian nonparametric methodology to different estimation problems. First, I apply this estimator to deconvolution and to hazard rate, density and regression estimation. Then, I consider the estimation of an Instrumental Regression that is useful in micro-econometrics when we have to deal with problems of endogeneity. Finally, I develop an application in finance: I get the bayesian estimator for the equilibrium asset pricing functional by using the Euler equation defined in the Lucas'(1978) tree-type models.

Three Essays in Economics of Gender

During recent decades, economists' interest in gender-related issues has risen. Researchers aim to show how economic theory can be applied to gender related topics such as peer effect, labor market outcomes, and education. This dissertation aims to contribute to our understandings of the interaction, inequality and sources of differences across genders, and it consists of three empirical papers in the research area of gender economics. The aim of the first paper ("Separating gender composition effect from peer effects in education") is to demonstrate the importance of considering endogenous peer effects in order to identify gender composition effect. This fact is analytically illustrated by employing Manski's (1993) linear-in-means model. The paper derives an innovative solution to the simultaneous identification of endogenous and exogenous peer effects: gender composition effect of interest is estimated from auxiliary reduced-form estimates after identifying the endogenous peer effect by using Graham (2008) variance restriction method. The paper applies this methodology to two different data sets from American and Italian schools. The motivation of the second paper ("Gender differences in vulnerability to an economic crisis") is to analyze the different effect of recent economic crisis on the labor market outcome of men and women. Using triple differences method (before-after crisis, harder-milder hit sectors, men-women) the paper used British data at the occupation level and shows that men suffer more than women in terms of probability of losing their job. Several explanations for the findings are proposed. The third paper ("Gender gap in educational outcome") is concerned with a controversial academic debate on the existence, degree and origin of the gender gap in test scores. The existence of a gap both in mean scores and the variability around the mean is documented and analyzed. The origins of the gap are investigated by looking at wide range of possible explanations.

Essays in behavioral economics

In this work we conduct an experimental analysis on different behavioral models of economic choice. In particular, we analyze the role of overconfidence in shaping the beliefs of economics agents about the future path of their consumption or investment. We discuss the relevance of this bias in expectation formation both from a static and from a dynamic point of view and we analyze the effect of possible interventions aimed to achieve some policy goals. The methodology we follow is both theoretical and empirical. In particular, we make large use of controlled economic field experiments in order to test the predictions of the theoretical models we propose. In the second part of the thesis we discuss the role of cognition and personality in affecting economic preferences and choices. In this way we make a bridge between established psychological research and novel findings in economics. Finally, we conduct a field study on the role of incentives on education. We design different incentive schemes and we test, on randomized groups of students, their effectiveness in improving academic performance.

Essays in Long-run Development and Spatial Economics

This thesis tries to further our understanding for why some countries today are more prosperous than others. It establishes that part of today's observed variation in several proxies such as income or gender inequality have been determined in the distant past. Chapter one shows that 450 years of (Catholic) Portuguese colonisation had a long-lasting impact in India when it comes to education and female emancipation. Furthermore I use a historical quasi-experiment that happened 250 years ago in order to show that different outcomes have different degrees of persitence over time. Educational gaps between males and females seemingly wash out a few decades after the public provision of schools. The male biased sex-ratios on the other hand stay virtually unchanged despite governmental efforts. This provides evidence that deep rooted son preferences are much harder to overcome, suggesting that a differential approach is needed to tackle sex-selective abortion and female neglect. The second chapter proposes improvements for the execution of Spatial Regression Discontinuity Designs. These suggestions are accompanied by a full-fledged spatial statistical package written in R. Chapter three introduces a quantitative economic geography model in order to study the peculiar evolution of the European urban system on its way to the Industrial Revolution. It can explain the shift of economic gravity from the Mediterranean towards the North-Sea ("little divergence"). The framework provides novel insights on the importance of agricultural trade costs and the peculiar geography of Europe with its extended coastline and dense network of navigable rivers.

Essays in Applied and Labor Economics

This thesis consists of three chapters. First and second chapter include original research papers with the focus of health behavior and refugee migration. In the context of a high-income developing country, Turkey, I provide new insights for the established policy discussions in the literature. Then, third chapter reviews the literature and perspectives on the determinants of attitude formation towards migration policy and migrants. This chapter extends the discussion in Chapter 2 and aims at understanding the reasons of recent global trends in anti-migration attitudes. In Chapter 1, I investigate the effects of education on the early investments of mothers in their children aged between 0-5. Exploiting a compulsory schooling reform, I document the causal effects of education on young mothers' health investments during pregnancy and postnatal period. Results suggest that there are positive effects on the use of health care services, while no effects on breast- feeding or vaccination take-ups. These results can be put into context through newly implemented Health Transformation Program in the country. I show that educated mothers use new services more and empowerment effects of the education have a role in the service use. This study gives important policy lessons to improve mothers' health care use and early child conditions in developing countries. In Chapter 2, I investigate the effects of refugee inflow on the voting behavior of natives. I use a novel data provided by a telecommunication company, focus on pre and post refugee inflow elections and investigate the vote share of the party announced "open-door" policy. Analysis suggests that although refugees and natives are culturally closer than the Western country contexts, small negative effects documented are likely be driven by non-economic reasons. These findings bring a new perspective to understand why anti-immigrant sentiments are easy to use and manipulate.

Essays in Gender Economics

This thesis consists of three papers on gender economics. Chapter 1 studies whether people dislike collaborating with someone who corrects them and whether the dislike is stronger when that person is a woman. Having a good relationship with colleagues is integral in group work, potentially leading to successful collaborations. However, there are occasions when people have to correct their colleagues. Using a quasi-laboratory experiment, I find that people, including those with high productivity, are less willing to collaborate with a person who has corrected them even if the correction improves group performance. In addition, I find suggestive evidence that men respond more negatively to women’s corrections, which is not driven by their beliefs about the difference in women’s and men’s abilities. These findings suggest that there is a behavioral bias in group work that distorts the optimal selection of talents and penalizes those who correct others’ mistakes, and the distortion may be stronger when women correct men. Chapter 2 studies the role of gender and cognitive skills on other peoples’ generosity. Using a novel experimental design where I exogenously vary gender and cognitive skills and sufficiently powered analysis, I find neither the two attributes nor their interactions affect other people’s generosity; if anything, people are more generous to women with high potential. Chapter 3 studies how increased legal tolerance toward domestic violence affects married women’s welfare using the domestic violence decriminalization bill introduced to the Russian national congress in 2016. Using difference-in-differences and flexibly controlling for macroeconomic shocks, I find that the bill decreased married women’s life satisfaction and increased depression, especially among those with a college degree and a highly qualified white-collar occupation supposed to be more sensitive to gender regressive atmosphere. Consistent with this conjecture, people became more tolerant toward general and domestic violence after the bill.

Essays in Empirical Political Economics

This thesis takes two perspectives on political institutions. From the one side, it examines the long-run effects of institutions on cultural values. From the other side, I study strategic communication, and its determinants, of politicians, a pivotal actor inside those institutions. The first chapter provides evidence for the legacy of feudalism - a set of labor coercion and migration restrictions -, on interpersonal distrust. I combining administrative data on the feudal system in the Prussian Empire (1816 – 1849) with the geo-localized survey data from the German Socio-Economic Panel (1980 – 2020). I show that areas with strong historical exposure to feudalism have lower levels of inter-personal trust today, by means of OLS- and mover specifications. The second chapter builds a novel dataset that includes the Twitter handles of 18,000+ politicians and 61+ million tweets from 2008 – 2021 from all levels of government. I find substantial partisan differences in Twitter adoption, Twitter activity and audience engagement. I use established tools to measure ideological polarization to provide evidence that online-polarization follows similar trends to offline-polarization, at comparable magnitude and reaches unprecedented heights in 2018 and 2021. I develop a new tool to demonstrate a marked increase in affective polarization. The third chapter tests whether politicians disseminate distortive messages when exposed to bad news. Specifically, I study the diffusion of misleading communication from pro-gun politicians in the aftermath of mass shootings. I exploit the random timing of mass shootings and analyze half a million tweets between 2010 – 2020 in an event-study design. I develop and apply state-of-the-art text analysis tools to show that pro- gun politicians seek to decrease the salience of the mass shooting through distraction and try to alter voters’ belief formation through misrepresenting the causes of the mass shootings.

Essays in political and gender economics

In the first chapter, “Political power and the influence of minorities: theory and evidence from Italy”, I analyze the relationship between minority and majority in politics, and how it can influence policy outcomes. I first present a theoretical model describing the possible consequences of an increase in a minority’s political power and show how it can increase difficulties in reaching a compromise on policy outcomes between parties. Furthermore, I empirically test these implications by exploiting the introduction in 2012 of a gender quota in Italian local elections: the increase in female politicians had heterogeneous effects on the level of funding for daycare, based on its differential effects on the share of women councillors. The second chapter, “Marriage patterns and the gender gap in labor force participation: evidence from Italy”, presents evidence highlighting a new possible determinant of the large gender gap in the Italian labor force: endogamy intensity. I argue that endogamy helps preserve social norms stigmatizing working women and reduces the probability of divorce, which disincentivizes women’s participation in the labor force. Endogamy is proxied by the degree of concentration of its surnames’ distribution, and I provide evidence that a more intense custom of endogamy contributed to enlarging gender participation gaps across Italian municipalities in 2001. The third chapter, “Information and quality of politicians: is transparency helping voters?”, studies how voting choices are affected by giving voters more personal information on candidates. I exploit the introduction of the “Spazzacorrotti” law in Italy in 2019, which imposed candidates at local elections to publish their CVs and criminal records before elections. I find no effects on elected candidates’ age, gender, educational level, or ideology. Moreover, I present anecdotal evidence that candidates with a criminal record received fewer votes on average, but only in the case of local media exposing it.

A partial dependence factorial analysis to deal with selection bias in observational studis

This thesis presents a creative and practical approach to dealing with the problem of selection bias. Selection bias may be the most important vexing problem in program evaluation or in any line of research that attempts to assert causality. Some of the greatest minds in economics and statistics have scrutinized the problem of selection bias, with the resulting approaches – Rubin’s Potential Outcome Approach(Rosenbaum and Rubin,1983; Rubin, 1991,2001,2004) or Heckman’s Selection model (Heckman, 1979) – being widely accepted and used as the best fixes. These solutions to the bias that arises in particular from self selection are imperfect, and many researchers, when feasible, reserve their strongest causal inference for data from experimental rather than observational studies. The innovative aspect of this thesis is to propose a data transformation that allows measuring and testing in an automatic and multivariate way the presence of selection bias. The approach involves the construction of a multi-dimensional conditional space of the X matrix in which the bias associated with the treatment assignment has been eliminated. Specifically, we propose the use of a partial dependence analysis of the X-space as a tool for investigating the dependence relationship between a set of observable pre-treatment categorical covariates X and a treatment indicator variable T, in order to obtain a measure of bias according to their dependence structure. The measure of selection bias is then expressed in terms of inertia due to the dependence between X and T that has been eliminated. Given the measure of selection bias, we propose a multivariate test of imbalance in order to check if the detected bias is significant, by using the asymptotical distribution of inertia due to T (Estadella et al. 2005) , and by preserving the multivariate nature of data. Further, we propose the use of a clustering procedure as a tool to find groups of comparable units on which estimate local causal effects, and the use of the multivariate test of imbalance as a stopping rule in choosing the best cluster solution set. The method is non parametric, it does not call for modeling the data, based on some underlying theory or assumption about the selection process, but instead it calls for using the existing variability within the data and letting the data to speak. The idea of proposing this multivariate approach to measure selection bias and test balance comes from the consideration that in applied research all aspects of multivariate balance, not represented in the univariate variable- by-variable summaries, are ignored. The first part contains an introduction to evaluation methods as part of public and private decision process and a review of the literature of evaluation methods. The attention is focused on Rubin Potential Outcome Approach, matching methods, and briefly on Heckman’s Selection Model. The second part focuses on some resulting limitations of conventional methods, with particular attention to the problem of how testing in the correct way balancing. The third part contains the original contribution proposed , a simulation study that allows to check the performance of the method for a given dependence setting and an application to a real data set. Finally, we discuss, conclude and explain our future perspectives.

Politiche pubbliche per la stagionalità del turismo da una prospettiva territoriale. Casi di studio in Scozia e in Sardegna

Rita Cannas presents a PhD thesis in Economics (Geo-Economic curriculum) which is titled “Public Policies for Seasonality in Tourism from a Territorial Perspective. Case Studies in Scotland and Sardinia”. The specific area of the research is public policies for contrasting seasonality in tourism in peripheral areas. Seasonality has seen such as a problem in terms of social and economics patterns especially for those local communities which are situated in peripheral areas. The research explores what, how and for who, public policies, that have been in place in Scotland and Sardinia over the last 10-5 years, are working and what kind of results these have produced. The research has empirical and theoretical implications for studying tourism seasonality. It aims to highlight the local supply patterns of the phenomenon investigated, and to improve knowledge about the strategies and the policies that have been adopted in the two territorial contexts (Scotland and Sardinia) for contrasting or modifying seasonality in tourism. The type of subject and the research questions have suggested the adoption of an interpretative theoretical perspective and a qualitative methodological approach, although a set of quantitative secondary data is also required for understanding main tourism's characteristics and for analyzing the specificity of seasonality. Interview with key actors of the local system in Scotland and Sardinia is the method chosen to collect primary data. In total the researcher has done 20 interviews in deep. Case studies are chosen both as unity of analysis and research strategy. The main findings of the research show a different and complex scenario about quality and quantity of public policies and strategies in tourism in the two case studies. The role of local resources is quite strategic on delivering tourism services and on counteracting seasonality. Events, festival are the main demand-side strategies. From a supply-side the principles policies are focused on quality of services, technology, high skills, sustainability. Partnership between public and private sector seems to be a fundamental way to work in order to attain changes and outcomes. The research has a strong research design, provides coherent results, and it has been done paying attention to the validation of the whole process.

Essays in structural heuristics

This dissertation introduces and develops a new method of rational reconstruction called structural heuristics. Structural heuristics takes assignment of structure to any given object of investigation as the starting point for its rational reconstruction. This means to look at any given object as a system of relations and of transformation laws for those relations. The operational content of this heuristics can be summarized as follows: when facing any given system the best way to approach it is to explicitly look for a possible structure of it. The utilization of structural heuristics allows structural awareness, which is considered a fundamental epistemic disposition, as well as a fundamental condition for the rational reconstruction of systems of knowledge. In this dissertation, structural heuristics is applied to reconstructing the domain of economic knowledge. This is done by exploring four distinct areas of economic research: (i) economic axiomatics; (ii) realism in economics; (iii) production theory; (iv) economic psychology. The application of structural heuristics to these fields of economic inquiry shows the flexibility and potential of structural heuristics as epistemic tool for theoretical exploration and reconstruction.

Data, Competition, and Consumer Privacy in Digital Markets

In digital markets personal information is pervasively collected by firms. In the first chapter I study data ownership and product customization when there is exclusive access to non rival but excludable data about consumer preferences. I show that an incumbent firm does not have an incentive to sell an exclusively held dataset with a rival firm, but instead it has an incentive to trade a customizing technology with the other firm. In the second chapter I investigate the effects of consumer information on the intensity of competition. In a two dimensional model of product differentiation, firms use information on preferences to practice price discrimination. I contrast a full privacy and a no privacy benchmark with a regime in which firms are able to target consumers only partially. When data is partially informative, firms are always better-off with price discrimination and an exclusive access to user data is not necessarily a competition policy concern. From a consumer protection perspective, the policy recommendation is that the regulator should promote either no privacy or full privacy. In the third chapter I introduce a data broker that observes either only one or both dimensions of consumer information and sells this data to competing firms for price discrimination purposes. When the seller exogenously holds a partially informative dataset, an exclusive allocation arises. Instead, when the dataset held is fully informative, the data broker trades information non exclusively but each competitor acquires consumer data on a different dimension. When data collection is made endogenous, non exclusivity is robust if collection costs are not too high. The competition policy suggestion is that exclusivity should not be banned per se, but it is data differentiation in equilibrium that rises market power in competitive markets. Upstream competition is sufficient to ensure that both firms get access to consumer information.

Essays in Economic Geography and Long-Term Development

This dissertation has two main themes: first, the economic impact of tourism on cities and, secondly, the determinants of European long-run development, with a focus on the pre-Industrial era. The common thread is the attempt to develop economic geography models that incorporate spatial frictions and are liable to be given empirical content. Chapter 1, written in conjunction with G. Alfredo Minerva, provides an empirical analysis of the relationship between tourism and economic activity across Italian municipalities, and lays down the basic elements of an urban theory of tourism in an a-spatial setting. Chapter 2 extends these ideas to a quantitative urban framework to study the economic impact and the welfare consequences of tourism into the city of Venice. The model is given empirical content thanks to a large collection of data at the Census tract level for the Municipality of Venice, and then used to perform counterfactual policty analysis. In chapter 3, with Matteo Santacesaria, we consider a setting where agents are continuously distributed over a two-dimensional heterogeneous geography, and are allowed to do business at a finite set of markets. We study the equilibrium partition of the economic space into a collection of mutually-exclusive market areas, and provide condition for this equilibrium partition to exist and to be unique. Finally, chapter 4 "The rise of (urban) Europe: a Quantitative-Spatial analysis", co-authored with Matteo Cervellati and Alex Lehner, sets up a quantitative economic geography model to understand the roots of the Industrial Revolution, in an attempt to match the evolution of the European urban network, and the corresponding city-size distribution, over the period A.D. 1000-1850. It highlights the importance of agricultural trade across cities for the emergence of large manufacturing hubs.

Essays on Information Economics

This thesis consists of three essays on information economics. I explore how information is strategically communicated or designed by senders who aim to influence the decisions of a receiver. In the first chapter, I study a cheap talk game between two imperfectly informed experts and a decision maker. The experts receive noisy signals about the state and sequentially communicate the relevant information to the decision maker. I refine the self-serving belief system under uncertainty and Ι characterise the most informative equilibrium that might arise in such environments.In the second chapter, I consider the case where a decision maker seeks advice from a biased expert who cares also about establishing a reputation of being competent. The expert has the incentives to misreport her information but she faces a trade-off between the gain from misrepresentation and the potential reputation loss. I show that the equilibrium is fully-revealing if the expert is not too biased and not too highly reputable. If there is competition between two experts the information transmission is always improved. However, in cases where the experts are more than two the result is ambiguous, and it depends on the players’ prior belief over states.In the last chapter, I consider a model of strategic communication where a privately and imperfectly informed sender can persuade a receiver. The sender may receive favorable or unfavorable private information about her preferred state. I describe two ways that are adopted in real life situations and theoretically improve equilibrium informativeness given sender's private information. First, a policy that suggests symmetry constraints to the experiments' choice. Second, an approval strategy characterised by a low precision threshold where the receiver will accept the sender with a positive probability and a higher one where the sender will be accepted with certainty.

Timeliness, efficiency and public procurement in hip surgery in Italy

Considering different perspectives, the scope of this thesis is to investigate how to improve healthcare resources allocation and the provision efficiency for hip surgeries, a resource-intensive operation, among the most frequently performed on the elderly, with a trend in volume that is increasing in years due to population aging. Firstly, the effect of Time-To-Surgery (TTS) on mortality for hip fracture patients is investigated. The analysis attempts to account for TTS endogeneity due to the inability to fully control for variables affecting patient delay – e.g. patient severity. Exploiting an instrumental variable model, where being admitted on Friday or Saturday predicts longer TTS, findings show exogenous TTS does not have a significant effect on mortality. Thus suggesting surgeons prioritize patients effectively, neutralizing the adverse impact of longer TTS. Then, the volume-outcome relation for total hip replacement surgery is analyzed, seeking to account for selective referral, which may be present in elective surgery context, and induce reverse causality issue in the volume-outcome relation. The analysis employs a conditional choice model where patient travel distance from all regions' hospitals is used as a hospital choice predictor. Findings show the exogenous hospital volume significantly decreases adverse outcomes probability, especially in the short run. Finally, the change in public procurement design enforced in the Romagna LHA (Italy) is exploited to assess its impact on hip prostheses cost, surgeons' implant choice, and patient health outcomes. Hip prostheses are the major cost-driver of hip replacement surgeries, hence it is crucial to design the public tender such that implant prices are minimized, but cost-containment policies have to be weighted with patient well-being. Evidence shows that a cost reduction occurred without a significant surgeons’ choices impact. Positive or no effect of surgeons specialization is found on patients outcomes after the new procurement introduction.