Showing papers by "London School of Economics and Political Science published in 2011"

Top Incomes in the Long Run of History

Abstract: A recent literature has constructed top income shares time series over the long run for more than twenty countries using income tax statistics. Top incomes represent a small share of the population but a very significant share of total income and total taxes paid. Hence, aggregate economic growth per capita and Gini inequality indexes are sensitive to excluding or including top incomes. We discuss the estimation methods and issues that arise when constructing top income share series, including income definition and comparability over time and across countries, tax avoidance, and tax evasion. We provide a summary of the key empirical findings. Most countries experience a dramatic drop in top income shares in the first part of the twentieth century in general due to shocks to top capital incomes during the wars and depression shocks. Top income shares do not recover in the immediate postwar decades. However, over the last thirty years, top income shares have increased substantially in English speaking countries and in India and China but not in continental European countries or Japan. This increase is due in part to an unprecedented surge in top wage incomes. As a result, wage income comprises a larger fraction of top incomes than in the past. Finally, we discuss the theoretical and empirical models that have been proposed to account for the facts and the main questions that remain open.

Top Incomes in the Long Run of History

Abstract: A recent literature has constructed top income shares time series over the long run for more than twenty countries using income tax statistics. Top incomes represent a small share of the population but a very significant share of total income and total taxes paid. Hence, aggregate economic growth per capita and Gini inequality indexes are sensitive to excluding or including top incomes. We discuss the estimation methods and issues that arise when constructing top income share series, including income definition and comparability over time and across countries, tax avoidance, and tax evasion. We provide a summary of the key empirical findings. Most countries experience a dramatic drop in top income shares in the first part of the twentieth century in general due to shocks to top capital incomes during the wars and depression shocks. Top income shares do not recover in the immediate postwar decades. However, over the last thirty years, top income shares have increased substantially in English speaking countries and in India and China but not in continental European countries or Japan. This increase is due in part to an unprecedented surge in top wage incomes. As a result, wage income comprises a larger fraction of top incomes than in the past. Finally, we discuss the theoretical and empirical models that have been proposed to account for the facts and the main questions that remain open.

Does Adaptation to Climate Change Provide Food Security? A Micro-Perspective from Ethiopia

Abstract: We examine the driving forces behind farmers’ decisions to adapt to climate change, and the impact of adaptation on farmers’ food production. We investigate whether there are differences in the food production functions of farm households that adapted and those that did not adapt. We estimate a simultaneous equations model with endogenous switching to account for the heterogeneity in the decision to adapt or not, and for unobservable characteristics of farmers and their farm. We compare the expected food production under the actual and counterfactual cases that the farm household adapted or not to climate change. We find that the group of farm households that adapted has systematically different characteristics than the group of farm households that did not adapt. The relationship between production and average temperature is inverted U-shaped for farm households that adapted, while it is U-shaped for farm households that did not adapt, and vice versa in the case of precipitation. We find that adaptation increases food production, however, the impact of adaptation on food production is smaller for the farm households that actually did adapt than for the farm households that did not adapt in the counterfactual case that they adapted.

Unwilling or Unable to Cheat? Evidence From a Tax Audit Experiment in Denmark

Abstract: This paper analyzes a tax enforcement field experiment in Denmark. In the base year, a stratified and representative sample of over 40,000 individual income tax filers was selected for the experiment. Half of the tax filers were randomly selected to be thoroughly audited, while the rest were deliberately not audited. The following year, threat-of-audit letters were randomly assigned and sent to tax filers in both groups. We present three main empirical findings. First, using baseline audit data, we find that the tax evasion rate is close to zero for income subject to third-party reporting, but substantial for self-reported income. Since most income is subject to third-party reporting, the overall evasion rate is modest. Second, using quasi-experimental variation created by large kinks in the income tax schedule, we find that marginal tax rates have a positive impact on tax evasion for self-reported income, but that this effect is small in comparison to legal avoidance and behavioral responses. Third, using the randomization of enforcement, we find that prior audits and threat-of-audit letters have significant effects on self-reported income, but no effect on third-party reported income. All these empirical results can be explained by extending the standard model of (rational) tax evasion to allow for the key distinction between self-reported and third-party reported income.

Market Size, Competition, and the Product Mix of Exporters

Abstract: We build a theoretical model of multi-product firms that highlights how competition across market destinations affects both a firm's exported product range and product mix. We show how tougher competition in an export market induces a firm to skew its export sales towards its best performing products. We find very strong confirmation of this competitive effect for French exporters across export market destinations. Theoretically, this within firm change in product mix driven by the trading environment has important repercussions on firm productivity. A calibrated fit to our theoretical model reveals that these productivity effects are potentially quite large.

Multi-Product Firms and Trade Liberalization

Abstract: This paper develops a general equilibrium model of international trade that features selection across …rms, products and countries. Firms’export decisions depend on a combination of …rm “productivity”and …rm-product-country “consumer tastes”, both of which are stochastic and unknown prior to the payment of a sunk cost of entry. Higher-productivity …rms export a wider range of products to a larger set of countries than lower-productivity …rms. Trade liberalization induces endogenous reallocations of resources that foster productivity growth both within and across …rms. Empirically, we …nd key implications of the model to be consistent with U.S. trade

A global ranking of port cities with high exposure to climate extremes

Abstract: This paper presents a first estimate of the exposure of the world’s large port cities (population exceeding one million inhabitants in 2005) to coastal flooding due to sea-level rise and storm surge now and in the 2070s, taking into account scenarios of socio-economic and climate changes. The analysis suggests that about 40 million people (0.6% of the global population or roughly 1 in 10 of the total port city population in the cities considered) are currently exposed to a 1 in 100 year coastal flood event. For assets, the total value exposed in 2005 across all cities considered is estimated to be US$3,000 billion; corresponding to around 5% of global GDP in 2005 (both measured in international USD) with USA, Japan and the Netherlands being the countries with the highest values. By the 2070s, total population exposed could grow more than threefold due to the combined effects of sea-level rise, subsidence, population growth and urbanisation with asset exposure increasing to more than ten times current levels or approximately 9% of projected global GDP in this period. On the global-scale, population growth, socio-economic growth and urbanization are the most important drivers of the overall increase in exposure particularly in developing countries, as low-lying areas are urbanized. Climate change and subsidence can significantly exacerbate this increase in exposure. Exposure is concentrated in a few cities: collectively Asia dominates population exposure now and in the future and also dominates asset exposure by the 2070s. Importantly, even if the environmental or socio-economic changes were smaller than assumed here the underlying trends would remain. This research shows the high potential benefits from risk-reduction planning and policies at the city scale to address the issues raised by the possible growth in exposure.

The Fundamental Law of Road Congestion: Evidence from US Cities

Abstract: We investigate the effect of lane kilometers of roads on vehicle-kilometers traveled (VKT) in US cities. VKT increases proportionately to roadway lane kilometers for interstate highways and probably slightly less rapidly for other types of roads. The sources for this extra VKT are increases in driving by current residents, increases in commercial traffic, and migration. Increasing lane kilometers for one type of road diverts little traffic from other types of road. We find no evidence that the provision of public transportation affects VKT. We conclude that increased provision of roads or public transit is unlikely to relieve congestion. (JEL R41, R48)

Economic Analysis for Ecosystem Service Assessments

Abstract: The paper seeks to contribute to the expanding literature on ecosystem service assessment by considering its integration with economic analyses of such services. Focussing upon analyses for future orientated policy and decision making, we initially consider a single period during which ecological stocks are maintained at sustainable levels. The flow of ecosystems services and their contribution to welfare bearing goods is considered and methods for valuing resultant benefits are reviewed and illustrated via a case study of land use change. We then broaden our time horizon to discuss the treatment of future costs and benefits. Finally we relax our sustainability assumption and consider economic approaches to the incorporation of depleting ecological assets with a particular focus upon stocks which exhibit thresholds below which restoration is compromised.

Wages, prices, and living standards in China, 1738–1925: in comparison with Europe, Japan, and India

Abstract: This article develops data on the history of wages and prices in Beijing, Canton, and Suzhou/Shanghai in China from the eighteenth century to the twentieth, and compares them with leading cities in Europe, Japan, and India in terms of nominal wages, the cost of living, and the standard of living. In the eighteenth century, the real income of building workers in Asia was similar to that of workers in the backward parts of Europe but far behind that in the leading economies in north-western Europe. Real wages stagnated in China in the eighteenth and early nineteenth centuries and rose slowly in the late nineteenth and early twentieth, with little cumulative change for 200 years. The income disparities of the early twentieth century were due to long-run stagnation in China combined with industrialization in Japan and Europe.

Scaling policy preferences from coded political texts

Abstract: Scholars estimating policy positions from political texts typically code words or sentences and then build left-right policy scales based on the relative frequencies of text units coded into different categories. Here we reexamine such scales and propose a theoretically and linguistically superior alternative based on the logarithm of odds-ratios. We contrast this scale with the current approach of the Comparative Manifesto Project (CMP), showing that our proposed logit scale avoids widely acknowledged flaws in previous approaches. We validate the new scale using independent expert surveys. Using existing CMP data, we show how to estimate more distinct policy dimensions, for more years, than has been possible before, and make this dataset publicly available. Finally, we draw some conclusions about the future design of coding schemes for political texts.

Decentralization and Governance

Abstract: The most important theoretical argument concerning decentralization is that it can improve governance by making government more accountable and responsive to the governed. Improving governance is also central to the motivations of real-world reformers, who bear risks and costs in the interest of devolution. But the literature has mostly focused instead on policy-relevant outcomes, such as education and health services, public investment, and fiscal deficits. This paper examines how decentralization affects governance, in particular how it might increase political competition, improve public accountability, reduce political instability, and impose incentive-compatible limits on government power, but also threaten fiscal sustainability.

Inequality, Communication and the Avoidance of Disastrous Climate Change in a Public Goods Game

Abstract: International efforts to provide global public goods often face the challenges of coordinating national contributions and distributing costs equitably in the face of uncertainty, inequality, and free-riding incentives. In an experimental setting, we distribute endowments unequally among a group of people who can reach a fixed target sum through successive money contributions, knowing that if they fail, they will lose all their remaining money with 50% probability. In some treatments, we give players the option to communicate intended contributions. We find that inequality reduces the prospects of reaching the target but that communication increases success dramatically. Successful groups tend to eliminate inequality over the course of the game, with rich players signaling willingness to redistribute early on. Our results suggest that coordination-promoting institutions and early redistribution from richer to poorer nations are both decisive for the avoidance of global calamities, such as disruptive climate change.

Does Hospital Competition Save Lives? Evidence From The English NHS Patient Choice Reforms*

Abstract: Recent substantive reforms to the English National Health Service expanded patient choice and encouraged hospitals to compete within a market with fixed prices. This study investigates whether these reforms led to improvements in hospital quality. We use a difference-in-difference-style estimator to test whether hospital quality (measured using mortality from acute myocardial infarction) improved more quickly in more competitive markets after these reforms came into force in 2006. We find that after the reforms were implemented, mortality fell (i.e. quality improved) for patients living in more competitive markets. Our results suggest that hospital competition can lead to improvements in hospital quality.

Invention and Transfer of Climate Change–Mitigation Technologies: A Global Analysis

Abstract: This article uses the European Patent Office Worldwide Patent Statistical Database to examine the geographic distribution and global diffusion of inventions in thirteen climate-mitigation technologies since 1978. The data suggest that until 1990 innovation was driven mostly by energy prices. Since then, environmental policies, and, more recently, climate policies, have accelerated the pace of innovation. The data also indicate that innovation is highly concentrated in three countries-Japan, Germany, and the United States-which together account for 60 percent of total inventions. Surprisingly, the contribution of emerging economies is far from negligible as China and Brazil together account for about 10 percent of total inventions. However, inventions from emerging economies are less likely to find markets beyond their borders, suggesting that inventions from emerging economies have less value. More generally, international transfers occur mostly between developed countries (73 percent of all exported inventions). Exports from developed countries to emerging economies are still limited (22 percent) but are growing rapidly, especially to China.

Work–Life, Diversity and Intersectionality: A Critical Review and Research Agenda

Abstract: Work–life issues have important implications at both organizational and individual levels. This paper provides a critical review of the work–life literature from 1990 onwards through the lens of diversity, with a particular focus on disparities of power induced by methodological and conceptual framings of work and life. The review seeks to answer the following questions: What are the gaps and omissions in the work–life research? How may they be overcome? To answer these questions, the review scrutinizes blind spots in the treatment of life, diversity and power in work–life research in both positivist and critical scholarship. In order to transcend the blind spots in positivist and critical work–life research, the review argues the case for an intersectional approach which captures the changing realities of family and workforce through the lens of diversity and intersectionality. The theoretical contribution is threefold: first, the review demonstrates that contemporary framing of life in the work–life literature should be expanded to cover aspects of life beyond domestic life. Second, the review explains why and how other strands of diversity than gender also manifest as salient causes of difference in experiences of the work–life interface. Third, the review reveals that social and historical context has more explanatory power in work–life dynamics than the micro-individual level of explanations. Work–life literature should capture the dynamism in these contexts. The paper also provides a set of useful recommendations to capture and operationalize methodological and theoretical changes required in the work–life literature.

Evolutionary Theory and the Ultimate–Proximate Distinction in the Human Behavioral Sciences

Abstract: To properly understand behavior, we must obtain both ultimate and proximate explanations. Put briefly, ultimate explanations are concerned with why a behavior exists, and proximate explanations are concerned with how it works. These two types of explanation are complementary and the distinction is critical to evolutionary explanation. We are concerned that they have become conflated in some areas of the evolutionary literature on human behavior. This article brings attention to these issues. We focus on three specific areas: the evolution of cooperation, transmitted culture, and epigenetics. We do this to avoid confusion and wasted effort-dangers that are particularly acute in interdisciplinary research. Throughout this article, we suggest ways in which misunderstanding may be avoided in the future.

The JCMS Annual Lecture: The Greek Sovereign Debt Crisis and EMU: A Failing State in a Skewed Regime*

Abstract: The Greek sovereign debt crisis of 2010 exposed the weaknesses of governance of both the ‘euro area’ and of Greece. Successive governments in Athens had failed to overcome endemic problems of low competitiveness, trade and investment imbalances, and fiscal mismanagement placing the economy in a vulnerable international position. Once the market crisis erupted, the European Union's Council of Ministers and the European Central Bank failed to provide a timely and effective response. The implications are threefold: the constraints on domestic reform proved immutable to EU stimuli; the ‘euro’ is more vulnerable to crisis than previously acknowledged; and the early discussion on ‘euro’ governance reform suggests that its underlying philosophy has not shifted significantly towards more effective ‘economic governance’. This article explores the antecedents and management of the crisis and assesses the outcome. At the EU level, a paradox was evident in the denial of agency and resources that might limit the obligation of states to rescue an errant peer. Domestically, within Greece, the unprecedented external monitoring and policing of its economy – though matched by some initial successes – raises in the longer term sensitive issues of legitimacy and governability, with uncertain prospects for avoiding further crises.

Assessing climate change impacts, sea level rise and storm surge risk in port cities: a case study on Copenhagen

Abstract: This study illustrates a methodology to assess the economic impacts of climate change at a city scale and benefits of adaptation, taking the case of sea level rise and storm surge risk in the city of Copenhagen, capital of Denmark. The approach is a simplified catastrophe risk assessment, to calculate the direct costs of storm surges under scenarios of sea level rise, coupled to an economic input-output (IO) model. The output is a risk assessment of the direct and indirect economic impacts of storm surge under climate change, including, for example, production and job losses and reconstruction duration, and the benefits of investment in upgraded sea defences. The simplified catastrophe risk assessment entails a statistical analysis of storm surge characteristics, geographical-information analysis of population and asset exposure combined with aggregated vulnerability information. For the city of Copenhagen, it is found that in absence of adaptation, sea level rise would significantly increase flood risks. Results call for the introduction of adaptation in long-term urban planning, as one part of a comprehensive strategy to manage the implications of climate change in the city. Mitigation policies can also aid adaptation by limiting the pace of future sea level rise.

Cohesion policy in the European Union: growth, geography, institutions

Abstract: Since the reform of the Structural Funds in 1989, the EU has made the principle of cohesion one of its key policies. Much of the language of European cohesion policy eschews the idea of trade-offs between efficiency and equity, suggesting it is possible to maximize overall growth while also achieving continuous convergence in outcomes and productivity across Europe’s regions. Yet, given the rise in inter-regional disparities, it is unclear that cohesion policy has altered the pathway of development from what would have occurred in the absence of intervention. This article draws on geographical economics, institutionalist social science and endogenous growth theory, with the aim of providing a fresh look at cohesion policy. By highlighting a complex set of potential trade-offs and interrelations ‐ overall growth and efficiency; inter-territorial equity; territorial democracy and governance capacities; and social equity within places ‐ it revisits the rationale of cohesion policy, with particular attention to the geographical dynamics of economic development.

Tournaments Without Prizes: Evidence from Personnel Records

Abstract: We use a quasi-experimental research design to study the effect of giving workers feedback on their relative performance. The setting is a firm in which workers are paid piece rates and where, for exogenous reasons, management begins to reveal to workers their relative position in the distribution of pay and productivity. We find that merely providing this information leads to a large and long-lasting increase in productivity that is costless to the firm. Our findings are consistent with the interpretation that workers' incipient concerns about their relative standing are activated by information about how they are performing relative to others. This paper was accepted by Olav Sorenson, organizations.

Masculinity as a barrier to men's use of HIV services in Zimbabwe.

Abstract: Background: A growing number of studies highlight men’s disinclination to make use of HIV services. This suggests there are factors that prevent men from engaging with health services and an urgent need to unpack the forms of sociality that determine men’s acceptance or rejection of HIV services. Methods: Drawing on the perspectives of 53 antiretroviral drug users and 25 healthcare providers, we examine qualitatively how local constructions of masculinity in rural Zimbabwe impact on men’s use of HIV services. Results: Informants reported a clear and hegemonic notion of masculinity that required men to be and act in control, to have know-how, be strong, resilient, disease free, highly sexual and economically productive. However, such traits were in direct conflict with the ‘good patient’ persona who is expected to accept being HIV positive, take instructions from nurses and engage in health-enabling behaviours such as attending regular hospital visits and refraining from alcohol and unprotected extra-marital sex. This conflict between local understandings of manhood and biopolitical representations of ‘a good patient’ can provide a possible explanation to why so many men do not make use of HIV services in Zimbabwe. However, once men had been counselled and had the opportunity to reflect upon the impact of ART on their productivity and social value, it was possible for some to construct new and more ART-friendly versions of masculinity. Conclusion: We urge HIV service providers to consider the obstacles that prevent many men from accessing their services and argue for community-based and driven initiatives that facilitate safe and supportive social spaces for men to openly discuss social constructions of masculinity as well as renegotiate more health-enabling masculinities.

Implementation and adoption of nationwide electronic health records in secondary care in England: final qualitative results from prospective national evaluation in “early adopter” hospitals

Abstract: Objectives To evaluate the implementation and adoption of the NHS detailed care records service in "early adopter" hospitals in England.

Best practice elements of multilevel suicide prevention strategies: a review of systematic reviews

Abstract: Background: Evidence-based best practices for incorporation into an optimal multilevel intervention for suicide prevention should be identifiable in the literature. Aims: To identify effective interventions for the prevention of suicidal behavior. Methods: Review of systematic reviews found in the Pubmed, Cochrane, and DARE databases. Steps include risk-of-bias assessment, data extraction, summarization of best practices, and identification of synergistic potentials of such practices in multilevel approaches. Results: Six relevant systematic reviews were found. Best practices identified as effective were as follows: training general practitioners (GPs) to recognize and treat depression and suicidality, improving accessibility of care for at-risk people, and restricting access to means of suicide. Although no outcomes were reported for multilevel interventions or for synergistic effects of multiple interventions applied together, indirect support was found for possible synergies in particular combinations of interventions within multilevel strategies. Conclusions: A number of evidence-based best practices for the prevention of suicide and suicide attempts were identified. Research is needed on the nature and extent of potential synergistic effects of various preventive activities within multilevel interventions.