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Working Paper
Can Reputation Discipline the Gig Economy? Experimental Evidence from an Online Labor Market
Just as employers face uncertainty when hiring workers, workers also face uncertainty when accepting employment, and bad employers may opportunistically depart from expectations, norms, and laws. However, prior research in economics and information sciences has focused sharply on the employer?s problem of identifying good workers rather than vice versa. This issue is especially pronounced in markets for gig work, including online labor markets, where platforms are developing strategies to help workers identify good employers. We build a theoretical model for the value of such reputation ...
Working Paper
The Increasing Deflationary Influence of Consumer Digital Access Services
Consumer digital access services—internet, mobile phone, cable TV, and streaming—accounted for over 2 percent of U.S. household consumption in 2018. We construct prices for these services using direct measures of volume (data transmitted, talk time, and hours of programming). Our price index fell 12 percent per year from 1988 to 2018 while official prices moved up modestly. Using our digital services index, we estimate total personal consumption expenditure (PCE) prices have risen nearly 1/2 percentage point slower than the official index since 2008. Importantly, the spread between ...
Working Paper
Accounting for Innovations in Consumer Digital Services: IT still matters
This paper develops a framework for measuring digital services in the face of ongoing innovations in the delivery of content to consumers. We capture what Brynjolfsson and Saunders (2009) call "free goods" as the capital services generated by connected consumers' stocks of IT digital goods; this service flow augments the existing measure of personal consumption in GDP. Its value is determined by the intensity with which households use their IT capital to consume content delivered over networks, and its volume depends on the quality of the IT capital. Consumers pay for delivery services, ...
Journal Article
Decentralized Finance (DeFi): Transformative Potential and Associated Risks
Financial services in the crypto finance world are provided by a combination of centralized finance (CeFi) organizations and decentralized finance (DeFi). CeFi's are roughly similar to traditional financial intermediaries, but DeFi seeks to provide services using smart contracts (computer code) rather than an intermediary. DeFi's unusual structure creates some interesting potential but also raises new risks in addition to those already inherent in blockchains and crypto finance. This paper reviews some of the opportunities and risks.
Journal Article
An Introduction to Web3 with Implications for Financial Services
Web3 is used to describe the next iteration of the internet in which decentralized services are automated on blockchains. This paper describes the elements of Web3 including blockchains and tokens. It describes the largest decentralized finance protocols and some specific services where blockchain and tokens can be used. The paper concludes with a brief discussion of some regulatory challenges.
Discussion Paper
State-of-the-Field Conference on Cyber Risk to Financial Stability
The Federal Reserve Bank of New York partnered with Columbia University’s School of International and Public Affairs (SIPA) for the second annual State-of-the-Field Conference on Cyber Risk to Financial Stability on December 14-15, 2020. Hosted virtually due to the COVID-19 pandemic, the conference took place amidst the unfolding news of a cyberattack against a major cybersecurity vendor and software vendor, underscoring vulnerabilities from cyber risk.
Report
The Price of Processing: Information Frictions and Market Efficiency in DeFi
This paper investigates the speed of price discovery when information becomes publicly available but requires costly processing to become common knowledge. We exploit the unique institutional setting of hacks on decentralized finance (DeFi) protocols. Public blockchain data provides the precise time a hack’s transactions are recorded—becoming public information—while subsequent social media disclosures mark the transition to common knowledge. This empirical design allows us to isolate the price impact occurring during the interval characterized by information asymmetry driven purely by ...
Working Paper
The Increasing Deflationary Influence of Consumer Digital Access Services
Consumer digital access services—internet, mobile phone, cable TV, and streaming—accounted for over 2 percent of U.S. household consumption in 2018. We construct prices for these services using direct measures of volume (data transmitted, talk time, and hours of programming). Our price index fell 12 percent per year from 1988 to 2018 while official prices moved up modestly. Using our digital services index, we estimate total personal consumption expenditure (PCE) prices have risen nearly 1/2 percentage point slower than the official index since 2008. Importantly, the spread between ...
Report
Rational bias in macroeconomic forecasts
This paper develops a model of macroeconomic forecasting in which the wages firms pay their forecasters are a function of their accuracy as well as the publicity they generate for their employers by being correct. In the resulting Nash equilibrium, forecasters with identical models, information, and incentives nevertheless produce a variety of predictions in order to maximize their expected wages. In the case of heterogeneous incentives, the forecasters whose wages are most closely tied to publicity, as opposed to accuracy, produce the forecasts that deviate most from the consensus. We find ...
Working Paper
Data, Privacy Laws and Firm Production: Evidence from the GDPR
By regulating how firms collect, store, and use data, privacy laws may change the role of data in production and alter firm demand for information technology inputs. We study how firms respond to privacy laws in the context of the EU’s General Data Protection Regulation (GDPR) by using seven years of data from a large global cloud-computing provider. Our difference-in-difference estimates indicate that, in response to the GDPR, EU firms decreased data storage by 26% and data processing by 15% relative to comparable U.S. firms, becoming less “data-intensive.” To estimate the costs of the ...