Roberto Leombruni

Asset Price Dynamics among Heterogeneous Interacting Agents

In this paper, we investigate the presence of rationalherding on asset price dynamics during the intra-day trading withheterogeneous interacting agents, whose information set is notcomplete. In the model, individual probability measures offinancial investment strategies are defined using statisticalmechanics concepts. In addition, there is a learning processtoward the best strategy, implemented as a geneticalgorithm. Simulations show that imitative behavior can be arational strategy, since it allows an investor to gain excessreturns on an asset by exploiting information regarding pricedynamics not strictly contained in the fundamental solution. Herdbehavior is rational in the sense that it produces profits at theexpense of increasing the complexity of the system.

HERD BEHAVIOR AND NONFUNDAMENTAL ASSET PRICE FLUCTUATIONS IN FINANCIAL MARKETS

In this paper we investigate the effects of herding on asset price dynamics during continuous trading. We focus on the role of interaction among traders, and we investigate the dynamics emerging when we allow for a tendency to mimic the actions of other investors, that is, to engage in herd behavior. The model, built as a mean field in a binary setting (buy/sell decisions of a risky asset), is expressed by a three-dimensional discrete dynamical system describing the evolution of the asset price, its expected price, and its excess demand. We show that such dynamical system can be reduced to a unidirectionally coupled system. In line with the rational herd behavior literature [Bikhchandani, S., Sharma, S. (2000), Herd Behavior in Financial Markets: A Review. Working paper, IMF, WP/00/48], situations of multistability are observed, characterized by strong path dependence; that is, the dynamics of the system are strongly influenced by historical accidents. We describe the different kinds of dynamic behavior observed, and we characterize the bifurcations that mark the transitions between qualitatively different time evolutions. Some situations give rise to high sensitivity with respect to small changes of the parameters and/or initial conditions, including the possibility of invest or reject cascades (i.e., sudden uncontrolled increases or crashes of the prices).

A new Italian surveillance system for occupational injuries: characteristics and initial results.

BACKGROUND Occupational injuries research and surveillance is important for prevention and public health protection. A new occupational surveillance system based on linkage of work histories calculated from the Italian National Social Security Institute (INPS) and occupational injuries provided by the National Insurance Institute for Occupational Injuries (INAIL) was created and assessed. METHODS It has been extracted a 1% sample of individuals from INPS. For each subject, a detailed description of the career has been compiled between 1985 and 2004, and matched on an individual basis to work injuries between 1994 and 2003. It has been calculated injury rates and risks by economic activity, gender, age, job tenure, country of birth, and firm size. RESULTS The linkage success is very high both in engineering than in the construction sector. The comparison with Eurostat statistics is very positive. The injury risks calculated by job tenure, country of birth, and firm size are consistent with literature. The high injury rate for short work contracts remain unvaried also after controlling by age. CONCLUSIONS It is finally possible to describe injuries based on some main characteristics of the recent changes in the labor market, such as precarization, ageing of workers, migration, that databases currently available in Italy do not allow. The sample is longitudinal and can contribute to describing the development of the phenomena over time. The Ministry of Health is completing procedures to extend the sample and to increase the health outcomes for which a follow-up is available.

Employability of older workers in Italy and Europe

In many European countries the participation rates of older workers are worryingly low, and Italy – within this picture – has one of the worst records, particularly for females. In this paper we investigate whether this signals an issue about their employability. Indeed, the non-participation of an individual does not point to an employability issue as long as it is a free choice of the person, and as long as it does not hinder their future participation in the labour market. To address this point we single out which are the empirically most relevant factors in shaping cross country differentials. Two selection processes emerged as having a most prominent role: the life cycle decision for women of not participating to the labour market, and the access for men and women to early retirement schemes. Controlling for these selection processes international differences reduce significantly. In both cases the main issue is the possibility that a participation choice made in a given point in time – for instance the early retirement decision – can have long lasting consequences, hindering future transition possibilities of the individuals. The magnitude of the two selection processes suggests already some policy conclusions, which are derived in the paper, and points to the need of further research to ascertain whether there are barriers to late entries and re-entries in the labour market.

The Methodological Status of Agent-Based Simulations

In this paper I give a tentative assessment of the methodological status of agent based simulations. I first show under which conditions ABS can be a complement to traditional modelling. I then consider whether they can be held as a sound methodology of their own. Various topics relevant to the argument are briefly discussed, such as the forecasting role of theories, the realism of assumptions, Hayek’s insights on economics methodology. I cast the arguments given into some results of modern theory of abductive inference, providing a framework that helps clarify the logical status of simulations, and gives some hints on how to foster their role as a self sustained tool for economic reasoning.

Bayesian nonparametric disclosure risk estimation via mixed effects log-linear models

Statistical agencies and other institutions collect data under the promise to protect the confidentiality of respondents. When releasing microdata samples, the risk that records can be identified must be assessed. To this aim, a widely adopted approach is to isolate categorical variables key to the identification and analyze multi-way contingency tables of such variables. Common disclosure risk measures focus on sample unique cells in these tables and adopt parametric log-linear models as the standard statistical tools for the problem. Such models have often to deal with large and extremely sparse tables that pose a number of challenges to risk estimation. This paper proposes to overcome these problems by studying nonparametric alternatives based on Dirichlet process random effects. The main finding is that the inclusion of such random effects allows us to reduce considerably the number of fixed effects required to achieve reliable risk estimates. This is studied on applications to real data, suggesting in particular that our mixed models with main effects only produces roughly equivalent estimates compared to the all-two way interactions models, and is effective in defusing potential shortcomings of traditional log-linear models. This paper adopts a fully Bayesian approach that accounts for all sources of uncertainty, including that about the population frequencies, and supplies unconditional (posterior) variances and credible intervals.

Mean Field Effects and Interaction Cycles in Financial Markets

In this work, we investigated the effects of herding on assets price dynamics during the intra-day trading. The model — built as a mean-field in a binary setting (buy/sell decisions) — shows that when the interaction among individuals is low — i.e. there is few herding — the dynamics converges monotonically or with oscillations to the prior about the fundamental value of the asset (assumed constant and homogeneous across individuals). If agents give a larger weight to the action of the others fluctuations are amplified, until a Hopf bifurcation eventually occurs and limit cycles emerge. Simulations with gaussian noise on prices reproduce the same dynamics: rising either the strength of interaction or the intensity of choice the imitative behavior prevails on all other factors, and we have upward and downward rushes. For a wide range of “intermediate” values of parameters, some other interesting features emerge, such as excess kurtosis and clustering in the volatility of returns.

Injured workers and their return to work: Beyond individual disability and economic incentives

Purpose - – The purpose of this paper is to study the factors affecting the return to work (RTW) of injured workers in an institutional setting where workers’ earnings are fully compensated during the disability period. Design/methodology/approach - – The authors use a unique data set matching employer-employee panel data with Italian workers’ compensation records. The authors estimate survival models accounting for workers’ unobserved heterogeneity. Findings - – Workers with higher wage growth, higher relative wages and from firms with better histories of stable employment, RTW sooner. More vulnerable workers – immigrants, females, members of smaller firms – also tend to return sooner. But even when we control for such measures of commitment, status, and job security, high-wage workers RTW sooner. Research limitations/implications - – The authors use proxies as measures of commitment and status. The authors study blue-collar workers without finer job qualifications. The authors estimate a reduced form model. Practical implications - – In an institutional environment where the immediate cost of workers’ compensation benefits falls largely on firms, employers seem to pressure those workers whose time off is more costly, i.e., high-wage workers. The lack of evidence of Social implications - – Workers who are induced to RTW before full recovery jeopardize their long- term health and employability. Firms that put such pressure on employees might generate social costs that can be particularity high in the case of high productivity workers. Originality/value - – The paper offers the first quantitative analysis of an institutional setting where injured workers face 100 percent benefits replacement rate and have job security. This allows focus on other workers’ or employers’ reasons to speed RTW. It is one of very few economics studies on this topic in the European context, providing implications for human resource managers, state regulators, and unions.

Austerity Resistant Social Policies to Protect Employment: The Italian Case of the Wage Supplementation Fund (Cassa Integrazione Guadagni) in 2009-2013.

During the worse phase of the economic downturn, few social policies resisted to the austerity measures imposed to Italy by the European Union. Among them, the most important is the Wage Supplementation Fund, to protect workers and entrepreneurs from bankruptcy and unemployment. Adopting a realist methodology we studied the social mechanisms which are the roots of some political and administrative choices in that period; the public policy decision making approach gave us a theoretical base. Some main mechanisms have been discovered: technical and economic mechanisms overcame politics, social attitudes pushed political choices, the fear of political and social instability drove all parties.

Macroeconomic Conditions at Entry and Injury Risk at the Workplace

Using a unique dataset from Italy, we show that the local unemployment rate at entry has a persistent positive effect on severe and non‐severe workplace injuries of young workers. Entrants during recessions, despite receiving marginally higher entry wages, also experience slower wage growth. The observed pattern in the differences between severe and non‐severe injuries indicates that entrants during recessions might under‐report non‐severe workplace injuries. Our findings suggest that workers entering during recessions are persistently locked into low‐quality jobs and that the mix of hazardous tasks endogenously adjusts to the business cycle.