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  5. Economics of Information Technology
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Economics of Information Technology

Paper Session

Saturday, Jan. 7, 2023 10:15 AM - 12:15 PM (CST)

Sheraton New Orleans, Rhythms I
Hosted By: American Finance Association
  • Chair: Maryam Farboodi, Massachusetts Institute of Technology

The Changing Economics of Knowledge Production

Simona Abis
,
Columbia University
Laura Veldkamp
,
Columbia University

Abstract

Big data technologies change the way in which data and human labor combine to create knowledge. Is this a modest technological advance or a data revolution? Using hiring and wage data, we show how to estimate firms' data stocks and the shape of their knowledge production functions. Knowing how much production functions have changed informs us about the likely long-run changes in output, in factor shares, and in the distribution of income, due to the new, big data technologies. Using data from the investment management industry, our structural estimates predict that the labor share of income in knowledge work may fall by 5%. The change associated with big data technologies is similar in magnitude to estimates of the change brought on by the industrial revolution.

Are Stablecoins Stable

Adrien d'Avernas
,
Stockholm School of Economics
Vincent Maurin
,
Stockholm School of Economics
Quentin Vandeweyer
,
University of Chicago

Abstract

This paper proposes a framework to analyze the stability of stablecoins -- cryptocurrencies designed to peg its price to a currency. We characterize equilibrium stablecoin issuance and pegging dynamics, allowing for various degrees of commitment over the system’s key policy decisions. In our model, a stablecoin platform acts as a monopolist by restricting supply to maximize its seigniorage revenues. When technology allows for rule-based stablecoin supply adjustments, a local equilibrium in which the price is pegged exists. This equilibrium is nonetheless vulnerable to large negative demand shocks. Without a commitment technology on supply adjustments, a stable solution may still exist if the platform is able to commit to paying an interest rate on stablecoins that is contingent on its implicit leverage. Additionally, collateralizing and decentralizing stablecoin issuance help further stabilize the peg.

Investing in Lending Technology: IT Spending in Banking

Zhiguo He
,
University of Chicago
Bo Jiang
,
University of Florida
Douglas Xu
,
University of Florida
Xiao Yin
,
University of California-Berkeley

Abstract

This paper investigates the lending technology of the banking sector after the arrival of information age, by examining the investment in information technologies (IT) by U.S. commercial banks. Given the distinctive natures of banks' dealing with information throughout the process of lending activities, we link banks' IT spending in various categories to different aspects of their lending technologies. Investment in communication IT is shown to be more associated with improving banks' ability of soft information production and transmission, while investment in software IT helps prompt banks' hard information processing capacity. By exploiting polices that affect geographic regions differentially, we show that banks respond to an increased demand for small business credit (mortgage refinance) by increasing their spending on communication (software) IT spending. We also find an asymmetric impact of technological development on the labor employment in the banking sector.

Discussant(s)
Song Ma
,
Yale University
Linda Schilling
,
Washington University-St. Louis
Francesco D'Acunto
,
Georgetown University
JEL Classifications
  • G2 - Financial Institutions and Services