Michelle Sovinsky, University Zürich Title: Marijuana on Main Street? Estimating Demand in Markets with Limited Access
Abstract: Marijuana is the most common illicit drug with vocal advocates for legalization. Among other things, legalization would increase access and remove the stigma of illegal behavior. Our model of use disentangles the role of access from preferences and shows that selection into access is not random. We find that non-selection-corrected demand estimates are biased resulting in incorrect policy conclusions. Our results show the probability of underage use would increase by 38% and more than double in most age groups under legalization. Tax policies are e§ective at curbing use where over $8 billion in annual tax revenue could be realized. and Bertrand Candelon, Maastricht University Title: Detecting financial contagion in a multivariate system
Abstract: This paper proposes an original three-part sequential testing procedure (STP), with which to test for contagion using a multivariate model. First, it identifies structural breaks in the volatility of a given set of countries. Then a structural break test is applied to the correlation matrix to identify and date the potential contagion mechanism. As a third element, the STP tests for the distinctiveness of the break dates previously found. Compared to traditional contagion tests in a bivariate set-up, the STP has high testing power and is able to locate the dates of contagion more precisely. Monte Carlo simulations underline the importance of separating variance and correlation break testing, the endogenous dating of the breakpoints and the usage of multi-dimensional data. The procedure is applied for the 1997 Asian Financial Crisis, revealing the chronological order of the crisis events.