Matthias Weber

We study the role of investor experience in the formation of asset price bubbles.We conduct a call market experiment in which participants trade assets with each other and a learning-to-forecast experiment in which participants only forecast future prices (while trade based on these forecasts is computerized). Each experiment comprises three treatments varying the information that participants receive about the fundamental value. Each experimental market is repeated three times. Throughout, we observe sizable bubbles that persist despite participant experience. Our findings in the call market experiment contrast with those in the literature. Our findings in the learning-to-forecast experiment are novel.

We analyze different behavioral models of expectation formation in a multi-country New Keynesian currency union model. Our analyses yield the following robust results. First, economic integration is of crucial importance for the stability of the economic dynamics in a currency union. Second, when the economic dynamics are unstable, more activist monetary policy does not lead to stable economic dynamics. These findings have natural counterparts in the rational expectations version of the model: there, economic integration is crucial for the determinacy of the equilibrium and when the equilibrium is indeterminate, more activist monetary policy does not lead to a determinate equilibrium. In an application to euro area data, we find that the behavioral macroeconomic model outperforms its rational counterpart in terms of prediction performance.

There are many situations where different groups make collective decisions by voting in an assembly or committee in which each group is represented by a single person. There is a great deal of theoretical, normative literature on the question of what voting system such an assembly should use, but a consensus is lacking. Instead of studying theoretical concepts on the design of voting systems, I ask which voting systems individuals actually prefer. This is important for the legitimacy and acceptance of voting institutions. To answer this question, I design a laboratory experiment in which participants choose voting systems for assemblies when they do not know which group they will be in (and, as a control, when they do know it). Behind the veil of ignorance, participants predominantly choose voting systems that allocate more voting power to larger groups than the most prominent theoretical concept suggests. In front of the veil of ignorance, participants predominantly choose voting systems favoring their own group.

Under full rationality, a labour market tax levied on employers and a corresponding income tax levied on employees are equivalent. With boundedly rational agents, this equivalence is no longer obvious. In a real‐effort experiment, we study the effects of these taxes on preferences concerning the size of the public sector, subjective well‐being, labour supply and on‐the‐job performance. Our findings suggest that employer‐side taxes induce preferences for a larger public sector. Subjective well‐being is higher under employer‐side taxes while labour supply is lower, at least at the extensive margin. We discuss three mechanisms that may underlie these results.

Covariates in regressions may be linked to each other on a network. Knowledge of the network structure can be incorporated into regularized regression settings via a network penalty term. However, when it is unknown whether the connection signs in the network are positive (connected covariates reinforce each other) or negative (connected covariates repress each other), the connection signs have to be estimated jointly with the covariate coefficients. This can be done with an algorithm iterating a connection sign estimation step and a covariate coefficient estimation step. We develop such an algorithm, called 3CoSE, and show detailed simulation results and an application forecasting event times. The algorithm performs well in a variety of settings. We also briefly describe the publicly available R-package developed for this purpose.

"The Triumph of Injustice: How the Rich Dodge Taxes and How to Make Them Pay" is a book about taxation and inequality in the United States. It contains some comparisons to other countries and is certainly relevant beyond the US. The book describes how US taxes became less and less progressive, up to the point where the richest of the rich pay a lower fraction of their income in taxes than the middle class. The authors propose a variety of measures to address this, including the introduction of a progressive wealth tax and of an effective minimum corporate income tax.