Showing papers in "International Review of Economics in 2008"
TL;DR: A broad view of the role of reciprocity in economics and a quick introduction to each of the contributions enclosed in this special issue can be found in this paper, where a selection of papers presented at the International Conference on Reciprocity are compared and discussed.
Abstract: The importance of reciprocity is not new in economics. Contractual market exchanges and long-run interactions are both situations based on self-interested reciprocal behaviour. However, reciprocity is not only a behaviour but also a motive that sometimes appears to be inconsistent with self-interest. This fact produces a tension between those who try to explain reciprocal behaviour within the standard framework and those who aim at enlarging it with the introduction of additional behavioural principles. This special issue collects a selection of papers presented at the International Conference “Reciprocity. Theory and facts” were the two perspectives were compared and discussed. In this Introduction note we provide first a broad view of the role of reciprocity in economics and then a quick introduction to each of the contributions enclosed in this special issue.
26 citations
TL;DR: In this article, a partial equilibrium model of conflict where two agents differently evaluate a contested stake is considered, where agents have the option of choosing a second instrument to affect the outcome of the conflict.
Abstract: This paper considers a partial equilibrium model of conflict where two agents differently evaluate a contested stake. Differently from common contest models, agents have the option of choosing a second instrument to affect the outcome of the conflict. The second instrument is assumed to capture positive investments in ‘conflict management’—labeled as ‘talks’. The focus is on the asymmetry in the evaluation of the stake: whenever the asymmetry in the evaluation of the stake is large there is no room for cooperation and a conflict trap emerges; whenever the degree of asymmetry falls within a critical interval, cooperation seems to emerge only in the presence of a unilateral concession; as the evaluations of the stake converge, only reciprocal concessions can sustain cooperation. Finally the concept of entropy is applied to measure conflict and conflict management.
24 citations
TL;DR: In this article, a multi-layer cognitive model of trust is proposed, where trust is not conceived only as an attitude towards the other, implying different kinds of beliefs (evaluations, expectations, beliefs on the other's motives, etc.), but also as a willingness to rely on others that makes us dependent and vulnerable to them, as well as a concrete act of reliance based on this.
Abstract: We contest a reductive view of trust, quite diffused in economics, and in studies influenced by the Game-Theory framework: the idea that trust has necessarily to do with contexts requiring “reciprocation”; or that trust is trust in the other’s reciprocation. A multi-layer cognitive model of trust will be proposed. Trust is not conceived only as an attitude towards the other, implying different kinds of beliefs (evaluations, expectations, beliefs on the other”s motives, etc.), but also as a willingness to rely on others that makes us dependent and vulnerable to them, as well as a concrete act of reliance based on this. Not necessarily we trust people because they will be willing to reciprocate; and we do not necessarily reciprocate for reciprocating. Trust (even “genuine” trust) is based on a variety of motivations ascribed to others and makes prevail the adoption of our needs and goals: from “altruism” to “self-interest”, from reciprocation to norms or to affective reasons.
22 citations
TL;DR: In this article, the authors evaluate the performance of 51 mutual fund families based on a study of their diversified US managed mutual funds over an 11-year period and explore the determinants of performance gross of published expenses.
Abstract: We evaluate the performance of 51 mutual fund families based on a study of their diversified US managed mutual funds over an 11-year-period and explore the determinants of performance gross of published expenses. We find that mutual fund families which charge loads, high expenses to their most favored investors and have high turnover tend to perform badly, even gross of these fees. However, gross of published expenses, managed mutual fund portfolios of those families without loads, with low expenses in their least expensive class, and with low average turnover beat the corresponding indexes.
21 citations
TL;DR: In this article, the authors extended the two-sector growth model to a three-sector model, where the labor growth rate is variable and bounded over time, and the solution of this economic system is determined, as well as its long-run growth and asymptotic stability are investigated.
Abstract: Uzawa’s two-sector growth model is extended into a three-sector model, where the labor growth rate is variable and bounded over time. The solution of this economic system is determined, as well as its long-run growth and asymptotic stability are investigated.
17 citations
TL;DR: In this article, the notion of reciprocity is used to describe and analyze three historical forms of power relations, namely, clientelism, colonialism and cleptocracy, to outline basic features of societal organization.
Abstract: There is considerable quarrel as to what extent the shape and malfunctioning of contemporary African states can be attributed to the colonial experience or whether the precolonial heritage must be taken into account. Generally, the correct answer is that both, precolonial forms of political organization and the imposition of the colonial state, characterize the African situation. Yet, it is possible to distinguish more specifically between the two formative influences and to gauge their particular importance. Empirically, the result of the colonial encounter was, on the one hand, a subversion of traditional concepts of legitimacy and, on the other hand, still is the fact that the development of market economies and liberal democracies remains unlikely. Theoretically, I propose to use the notion of reciprocity to describe and analyze three historical forms of power relations, namely, clientelism, colonialism and cleptocracy. By reconstructing the historicity and malleability of the concept, I try to show its usefulness and adequacy to outline basic features of societal organization.
17 citations
TL;DR: In this paper, the impact of economic reforms on efficiency and productivity of the unorganized manufacturing sector in India was examined using several rounds of the large scale national sample survey state level data for 15 major Indian states for the period 1978-1979 to 2000-2001.
Abstract: This paper analyzes total factor productivity growth of the unorganized manufacturing sector in India using several rounds of the large scale national sample survey state level data for 15 major Indian states for the period 1978–1979 to 2000–2001. Data envelopment analysis is used to compute Malmquist total factor productivity index and its components. The impact of economic reforms on efficiency and productivity is examined. Evidence suggests that total factor productivity registered a positive growth during the period in the country as a whole. Most states in the country witnessed higher total factor productivity growth in the post 1990s reforms period than in the pre-reforms period. Decomposition of the Malmquist productivity index shows that improvement in technical efficiency rather than technical progress had contributed to the observed acceleration in the growth rate. Econometric analysis of the determinants of total factor productivity growth demonstrates that ownership, literacy, farm growth and infrastructure availability significantly influence total factor productivity growth in the sector.
14 citations
TL;DR: In this paper, a simple two-agent partial equilibrium model is proposed to analyze the impact of multiple externalities on the public policy in the technological context of the production of a good/activity.
Abstract: In this paper we study a particular case of “multiple” externalities associated to the production of a good/activity, whose external effects can change from positive to negative depending on the level of output (intersecting externalities). To analyze their impact on the public policy we propose a very simple two-agent partial equilibrium model in the technological context of externalities. In a static framework, the centralized solution always implies an optimal policy, which may consist of taxation or subsidization depending on the individual optimum and on the technology parameters. In a dynamic model with local knowledge of the efficiency function and instantaneous output adjustments, such an optimal policy can be structurally stable or unstable. In the latter case, under small changes of the parameters the policy may switch from low taxation/subsidization to high taxation/subsidization or vice versa, or even jump discontinuously from taxation to subsidization or vice versa. Furthermore, the decentralized solution based upon “tradable rights” can be economically equivalent to the centralized solution in the form of taxation policy but the two solutions may be not politically equivalent.
11 citations
TL;DR: In this paper, the authors propose a model of social relationships in which relational goods are the results of individual joint efforts and past attitudes toward socialising, and show the effect of individual different inclinations toward social relationships on the dynamic properties of the system either assuming homogeneous or heterogeneous individuals.
Abstract: We propose a model of social relationships in which relational goods are the results of individual joint efforts and past attitudes toward socialising. We show the effect of individual different inclinations toward social relationships on the dynamic properties of the system either assuming homogeneous or heterogeneous individuals. Particularly, we show the role assumed by the environment and past experience of individuals on the dynamic outcome. We use a triangular finite-different system to investigate these issues. We analyse the conditions for the convergence of the system to a low-socialising trap and we propose a few policy corrections to get out of it.
10 citations
TL;DR: This article found that the sums of money offered by undergraduates were modulated depending both on the psychological portraits of the responders and on the two modes of thinking in financial decision-making.
Abstract: In financial games requiring to take into account the reciprocal benefits, mind-reading—that is, trying to identify other people’s thoughts—is involved. Mind-reading may occur through either analytical or intuitive strategies. Two studies were carried out to deepen the role of analytical and intuitive modes of thinking in mind-reading in financial decision making. Employing the Ultimatum Game as a setting suitable for researching into these topics, we found that the sums of money offered by undergraduates were modulated depending both on the psychological portraits of the responders and on the two modes of thinking. Specifically we found that the sums of money the undergraduates offered varied consistently across the two studies according to specific responder’s psychological features such as honesty, sense of justice, personal dignity. As for the two modes of thinking, it turned out that in the intuitive task proposers offered larger amount of money than in the analytical task.
10 citations
TL;DR: In this paper, the main purpose of the paper is to answer the following questions: Why do firms and consumers take part in virtual or "electronic" communities? And are they driven by the usual or by more specific motivations based on reciprocity or we-rationality?
Abstract: Within knowledge-based economies, one of the major forms of organisational change concerns the impact of the introduction and dissemination of information and communication technologies on markets, consumers and firms. The existence of virtual or ‘electronic’ communities is one of the main consequences of this impact. In this context, the main purpose of this article is to answer the following questions: Why do firms and consumers take part in these communities? Are they driven by the usual or by more specific motivations based on reciprocity or we-rationality? Do these potentially new types of organisation and interaction, and new motivations change the working and the dynamics of our economic systems?
TL;DR: In this paper, the authors analyse the effects of profit sharing on the incentives to invest, using a real option approach, and conclude that profit sharing is preferable to a pure price-cap one, if it intervenes for high enough profit levels.
Abstract: When price-cap rules determine the structure of prices for a long period, they suffer a credibility problem and introduce an element of risk especially if a firm’s profits are “too large”. Profit sharing may be seen as a device to pre-determine price adjustments and thus to decrease regulatory risk. We analyse the effects of profit sharing on the incentives to invest, using a real option approach. Absent credibility issues, a well designed profit sharing system may be neutral relative to a pure price cap. With regulatory risk, profit sharing is preferable to a pure price-cap one, if it intervenes for high enough profit levels.
TL;DR: The authors assesses the extent to which the introduction of machinery into the labor process improves human capital or simplifies labor skills and forms a stream of unskillful laborers, and assess the relative issues and to assess the extent of the impact of introducing machinery on human capital and skills.
Abstract: A systemic element of prevailing economic growth and development is the massive introduction of machinery into the production process. The introduction of new technologies became decidedly a debated issue in economic analysis because of the dual character of technology, which simultaneously creates and destroys employment, advances and deteriorates labor skills. This paper attempts to introduce the relative issues and to assess the extent to which the introduction of machinery into the labor process improves human capital or simplifies labor skills and forms a stream of unskillful laborers.
TL;DR: In this article, the authors report results from two different settings of a three-player ultimatum game, where a player is randomly selected to make an offer to two receivers and a majority vote is required to implement the proposal.
Abstract: We report results from two different settings of a three-player ultimatum game. Under the “Monocratic” rule, a player is randomly selected to make an offer to two receivers. Under the “Democratic” rule, all three players make a proposal, and one proposal is then randomly selected. A majority vote is required to implement the proposal in either setting. Although the two rules are strategically equivalent, different patterns of behaviour emerge as the number of interactions increase. Under the “Monocratic” rule, proposers seem to be entitled to claim a larger share of the pie, and receivers are more likely to accept, than in the “Democratic” rule. We speculate that institutions allowing more participation in the process of collective choice lead to a more socially responsible behaviour in individuals.
TL;DR: In the problem of value in exchange, however, as set up in Aristotle's Nicomachean Ethics, the concept of reciprocity (antipeponthos) as equivalent exchange was central in commercial transactions as discussed by the authors.
Abstract: In modern discussions of reciprocity the concept is distinguished from that of self-interested exchange. In the problem of value in exchange, however, as set up in Aristotle’s Nicomachean Ethics the concept of reciprocity (antipeponthos) as equivalent exchange was central in commercial transactions. The paper discusses (1) the concept of antipeponthos in Aristotle, (2) how issues of trust and inequality of services provided were dealt in Aristotle and (3) the trajectory of the concept of equivalent exchange from Aristotle to Turgot.
TL;DR: A tectonic shift in the global economic prowess became obvious around the turn of the last century as discussed by the authors, and three decades of macroeconomic reforms, sustained growth and global integration have turned China into a future economic power of global magnitude, with unmatched breadth of resources and robust manufacturing sector.
Abstract: A tectonic shift in the global economic prowess became obvious around the turn of the last century. Three decades of macroeconomic reforms, sustained growth and global integration have turned China into a future economic power of global magnitude, with unmatched breadth of resources and a robust manufacturing sector. Significance of the Chinese economy has radically increased and it has traversed from the periphery of the global economy to the core. For all appearances, this progress is likely to continue in the foreseeable future. China has grown to be the fourth largest economy in the world in a short time span and the third largest trader. Events like dawning of an economic superpower occur once in several generations. China is endeavoring to make a new niche for itself in the global economy as well as formulate a new role.
TL;DR: In this article, the authors used a human capital earnings equation to quantify administrative corruption in the public sector in Albania and found that the administrative corruption was on average 2.6× the officials' current salary in Albania.
Abstract: This paper uses a human capital earnings equation to quantify administrative corruption in the public sector. Regression analyses are conducted based on information from surveys administered to public officials in Albania. After accounting for officials’ characteristics, e.g., schooling, experience, gender, type of agency, and public and private sectors’ features, we deduce that the administrative corruption was on average 2.6× the officials’ current salary in Albania, which is equivalent to 16.7% of the country’s GDP.
TL;DR: In this article, the authors explore the hypothesis that cooperative behavior might be motivated by pure self-interest when the social payoff in a game is increasing, and provide statistical evidence to identify the origin of cooperation within homogeneous and heterogeneous social groups.
Abstract: Cooperation is a pervasive social phenomenon, but more often than not economic theories have little to say about its causes and consequences In this paper, we explore the hypothesis that cooperative behaviour might be motivated by pure self-interest when the “social” payoff in a game is increasing We report the results of a series of experiments on the Centipede game The experiments are organised in two subsequent steps Subjects first participate in a 2-period trust game, randomly matched with unknown partners We apply the strategy method in order to elicit their social preferences On the basis of their pre-game behaviour, individuals are divided into three main social groups: selfish individuals, pure altruists and reciprocators At the second step of the experiment, subjects play a repeated 6-move Centipede game with an increasing final payoff Each subject plays twice, in a low and in a high-stake Centipede game, and he/she is informed about his/her co-player social preferences We provide statistical evidence to identify the origin of cooperation within homogeneous and heterogeneous social groups We construct a Poisson regression model to assess the determinants of the duration of conditional cooperation in the Centipede
TL;DR: In this article, the authors define reciprocity and explain the differences between the rationalities of means and ends, and propose a possible way to overcome the problem of incommensurability of ends.
Abstract: Reciprocity does not require exactness but only a certain equilibrium in the things reciprocated: it is often overabundant. In addition, reciprocity may be fulfilled by returning something of a different kind that may be heterogeneous and incommensurable with the thing received. The reason of this “uneven response” of reciprocity is that in these situations the exchange of means aims at manifesting some values that are ends for the persons involved. Hence, the consideration of reciprocity supposes a reinsertion of ends in economics. The paper firstly defines reciprocity. Next, it summarizes a variety of arguments for a reconsideration of ends in economics. After that, it explains the differences between the rationalities of means and ends. A key difference lies in the problem of incommensurability of ends. This problem will be then tackled and a possible way to overcome it will be proposed. It will be finally sustained that practical comparability allows for incommensurable fair reciprocation.
TL;DR: The authors argue that the subject of economic behaviour is not so much homo economicus as homo reciprocans. But they also question whether this re-conceptualisation has yet moved far enough.
Abstract: There is now compelling evidence to suggest that people respond in kind to helpful or hostile behaviour, so much so that some have been led to suggest that the subject of economic behaviour is not so much homo economicus as homo reciprocans. This recent interest in the phenomenon of reciprocity is part of a wider (and very welcome) rethinking of the basic attributes of the economic actor. On the basis of this recent work, economic theorising has moved some distance from the traditional modern-economic approach—an approach that simply assumes a strategically rational, egotistical actor and develops elaborate theorems therefrom—and towards a richer, more complex conceptualisation of the economic actor and her acts. On revisiting a remarkably similar debate that took place some 250 years earlier, however, we wonder whether this re-conceptualisation has yet moved far enough.
TL;DR: In this paper, a range of psychological evidence including multidimensional scaling studies, studies of emotional reactions, reasoning, functional MRI and judgments about punishment suggest that not all norms are psychologically equivalent, with only a subset of norm violations eliciting punitive sentiments.
Abstract: Gintis’ (2000) analysis of strong reciprocity in terms of group survival leads to the conclusion that any norm, be it cooperative or prudential, that potentially enhances group survival will be enforced by a significant subset of individuals (strong reciprocators) who enforce norms even at their own individual expense. Gintis’ assumption that the human mind is an initially structureless receptacle for cultural norms further reinforces this view. In contrast, I argue that humans possess a natural domain-specific competence for social cooperation that is distinct from our prudential competence in dealing with potential hazards. I review a range of psychological evidence including multidimensional scaling studies, studies of emotional reactions, reasoning, functional MRI and judgments about punishment suggesting that not all norms are psychologically equivalent, with only a subset of norm violations eliciting punitive sentiments.
TL;DR: In this article, the authors consider two different market strategies, price setting and quantity setting and two different vertical relationships: an (imperfectly) competitive one following Stackelberg mode and a more cooperative one with bargaining.
Abstract: We go through the decision to vertically integrate or its opposite, outsource, in an uncertain environment. We consider two different market strategies, price setting and quantity setting and two different vertical relationships: an (imperfectly) competitive one following Stackelberg mode and a more cooperative one with bargaining. In the first scenario, with certainty, price and quantity settings are alike, while with uncertainty the ranking changes. If a bargaining framework is adopted instead, quantity setting under uncertainty leads to an asymmetric distribution of realized gains along the vertical chain. Price setting turns out to be more equitable for firms and preferable even by consumers.
Journal Article•
TL;DR: The authors found that the aspiration for goal attainment may be a substitute for unemployment as an instigator of work motivation in full employment, and since raising the firm's goal has a diverse impact on the high and low need-for-achievement workers, a higher goal-setting does not appear capable of increasing worker effort within firms.
Abstract: This paper sets up an efficiency wage model which combines goal-attainment theory and the expectancy-valence approach. Taking account of the psychological work motivation, we find that the aspiration for goal attainment may be a substitute for unemployment as an instigator of work motivation in full employment. In addition, since raising the firm’s goal has a diverse impact on the high and low need-for-achievement workers, a higher goal-setting does not appear capable of increasing worker effort within firms. This finding reconciles the conflicting experimental results in industrial psychology literature.