Showing papers in "Journal of Economic Surveys in 2013"
TL;DR: In this article, the relative level of intergenerational mobility, whether classified by income, education, or social class, is summarized and explanations for the differences in earnings and education persistence are presented.
Abstract: This paper summarizes research on the relative level of intergenerational mobility - whether classified by income, education or social class. The literatures on education and income mobility reveal a similar ranking with South America, other developing nations, southern European countries and France tending to have rather limited mobility although the Nordic countries exhibit strong mobility. Estimates of mobility based on social class point to rather different patterns, and we demonstrate that these differences are most likely generated by intergenerational earnings persistence within social classes. The second part of the paper looks for explanations for the differences in earnings and education persistence and finds that mobility is negatively correlated with inequality and the return to education but positively correlated with a nation's education spending.
344 citations
TL;DR: In this article, the meta-analysis of economics research-network (MAER-Net) has created the below reporting guidelines and future meta-analyses in economics will be expected to follow these guidelines or give valid reasons why a meta analysis must deviate from them.
Abstract: Meta-regression analysis (MRA) can provide objective and comprehensive summaries of economics research. Their use has grown rapidly over the last few decades. To improve transparency and to raise the quality of MRA, the meta-analysis of economics research-network (MAER-Net) has created the below reporting guidelines. Future meta-analyses in economics will be expected to follow these guidelines or give valid reasons why a meta-analysis must deviate from them.
330 citations
TL;DR: The authors discusses the literature on bubbles and crashes in the most commonly used experimental asset market design, introduced by Smith et al. and documents the main findings based on the results from 41 published papers, 3 book chapters and 20 working papers.
Abstract: This paper discusses the literature on bubbles and crashes in the most commonly used experimental asset market design, introduced by Smith et al. It documents the main findings based on the results from 41 published papers, 3 book chapters and 20 working papers.
232 citations
TL;DR: The authors explored the link between publication selectivity and theory contests and found that competition and debate between rival theories reduces this selectivity, which improves economic inference and distorts scientific inference with potentially adverse effects on policy making.
Abstract: There is growing concern and mounting evidence of selectivity in empirical economics. Most empirical economic literatures have a truncated distribution of results. The aim of this paper is to explore the link between publication selectivity and theory contests. This link is confirmed through the analysis of 87 distinct empirical economics literatures, involving more than three and a half thousand separate empirical studies, using objective measures of both selectivity and contests. Our meta–meta-analysis shows that publication selection is widespread, but not universal. It distorts scientific inference with potentially adverse effects on policy making, but competition and debate between rival theories reduces this selectivity and thereby improves economic inference.
222 citations
TL;DR: In this article, the authors provide an overview of experimental literature on contests and point out the two main phenomena observed in most contest experiments: (i) overbidding relative to the standard Nash equilibrium prediction and (ii) heterogeneous behavior of exante symmetric contestants.
Abstract: We provide an overview of experimental literature on contests and point out the two main phenomena observed in most contest experiments: (i) overbidding relative to the standard Nash equilibrium prediction and (ii) heterogeneous behavior of ex-ante symmetric contestants. Based on the sample of contest experiments that we review, the median overbidding rate is 72%. We provide different explanations for the overbidding phenomenon, including bounded rationality, utility of winning, other-regarding preferences, probability distortion, and the shape of the payoff function. We also provide explanations for heterogeneous behavior of contestants based on differences in preferences towards winning, inequality, risk and losses, and demographic differences. Furthermore, we suggest mechanisms that can reduce overbidding and induce more homogeneous behavior. Finally, we discuss directions for future research.
221 citations
TL;DR: A survey of the empirical literature on export and import diversification and its linkages with growth is presented in this article, focusing on how export diversification relates to trade liberalization and economic development.
Abstract: This paper surveys the empirical literature on export and import diversification and its linkages with growth. We review widely used measures of diversification and the evidence about their evolution focusing on how export diversification relates to trade liberalization and economic development. We also discuss the linkages between trade diversification and productivity at the firm and industry level, highlighting new advances on the linkages between import diversification and productivity.
179 citations
TL;DR: This paper surveys the empirical literature on gasoline retailing, which has been growing rapidly over the last three decades, possibly in response to antitrust and regulatory concerns and increased availability of pricing data.
Abstract: This paper surveys the empirical literature on gasoline retailing, which has been growing rapidly over the last three decades, possibly in response to antitrust and regulatory concerns and increased availability of pricing data. Studies of both pricing and non-price decision variables are considered. In general, it is found that crude oil prices are the primary driver of national price movements over time. However, market structure has been identified as playing a role in price dynamics, equilibrium selection and price differentials across markets and stations. The economic literature emphasizes the importance of heterogeneity across stations and coordination problems faced by retailers. Several directions for future work are suggested, including the development of theory and demand estimation using high-frequency station level data.
150 citations
TL;DR: The authors review the empirical literature that studies the effect of ethnic diversity on public spending and on individual support for the welfare state and put a particular focus on the fast-growing literature that uses experiments to study the effects of diversity.
Abstract: We review the empirical literature that studies the effect of ethnic diversity on public spending and on individual support for the welfare state. The survey puts a particular focus on the fast-growing literature that uses experiments to study the effects of ethnic diversity. Many of these studies have appeared since the pioneering survey by Alesina and La Ferrara and have not been covered by a survey before.
128 citations
TL;DR: In this paper, the authors identify a discourse-based approach as a third way consistent with the democratic and value plural potential of deliberative monetary valuation, and identify the importance attributed to monetary value as an open question to be addressed as part of a process determining an agreement to pay.
Abstract: The use of deliberative methods to assess environmental values in monetary terms has been motivated by the potential for small group discussion to help with preference formation and the inclusion of non-economic values. In this review, two broad approaches are identified: preference economisation and preference moralisation. The former is analytical, concentrates upon issues of poor respondent cognition and produces a narrow conception of value linked to utilitarianism. The latter emphasises political legitimacy, appeals to community values and tends to privilege arguments made in the public interest. Both approaches are shown to embrace forms of value convergence, which undermine the prospects for value pluralism. As a result exclusion and predefinition of values dominates current practice. In order to maintain democratic credentials, the importance attributed to monetary value needs to be left as an open question to be addressed as part of a process determining an "agreement to pay". To this end we identify a discourse-based approach as a third way consistent with the democratic and value plural potential of deliberative monetary valuation.
122 citations
TL;DR: In this paper, the importance of information in financial decisions may be reduced or eliminated by psychological aspects of the individual, such as a state of overconfidence that is individual or shared with a group, or by the individual's limited ability to process complex and abundant information.
Abstract: Recent empirical evidence based on surveys and experimental activities within the fields of behavioral finance and financial education has offered economists new empirically based insights into how individuals use information in making financial decisions. Specifically, the importance of information in financial decisions may be reduced or eliminated by psychological aspects of the individual, such as a state of overconfidence that is individual or shared with a group, or by the individual's limited ability to process complex and abundant information. This paper aims to complement this emerging body of literature by studying how individuals perceive and process information when making financial decisions. We review these contributions and suggest a number of broad guidelines that can provide a framework for future discussion of this topic within financial decision theory.
117 citations
TL;DR: In this paper, an interdisciplinary survey of the current state of knowledge related to the theory, determinants and consequences of occupational safety and health (OSH) is presented, where the authors identify areas of future research interests and suggest indicators and priorities for policy initiatives that can improve the health and safety of workers in modern job markets.
Abstract: This paper engages in an interdisciplinary survey of the current state of knowledge related to the theory, determinants and consequences of occupational safety and health (OSH). It first describes the fundamental theoretical construct of compensating wage differentials, which is used by economists to understand the optimal provision of OSH in a perfectly competitive labour market. The plethora of incentives faced by workers and firms in job and insurance markets that determine the ultimate level of OSH are discussed in detail. The extensive empirical evidence from the hedonic wage and stated choice approaches used to assess the value of OSH is reviewed. The causes of inefficiency and inequity in the market for OSH, such as externalities, moral hazard in compensation insurance, systematic biases in individual risk perception/well-being and labour market segregation are subsequently examined. The implications of government intervention and regulation for tackling the aforementioned inefficiencies in OSH are then considered. Finally, the survey identifies areas of future research interests and suggests indicators and priorities for policy initiatives that can improve the health and safety of workers in modern job markets.
TL;DR: In this article, the authors examine the major parameters that are expected to affect the credibility of empirical economics: sample size, magnitude of pursued effects, number and pre-selection of tested relationships, flexibility and lack of standardization in designs, definitions, outcomes and analyses, financial and other interests and prejudices, and the multiplicity and fragmentation of efforts.
Abstract: The scientific credibility of economics is itself a scientific question that can be addressed with both theoretical speculations and empirical data. In this review, we examine the major parameters that are expected to affect the credibility of empirical economics: sample size, magnitude of pursued effects, number and pre-selection of tested relationships, flexibility and lack of standardization in designs, definitions, outcomes and analyses, financial and other interests and prejudices, and the multiplicity and fragmentation of efforts. We summarize and discuss the empirical evidence on the lack of a robust reproducibility culture in economics and business research, the prevalence of potential publication and other selective reporting biases, and other failures and biases in the market of scientific information. Overall, the credibility of the economics literature is likely to be modest or even low.
TL;DR: The authors present a general overview of papers that employ laboratory experiments to study oligopoly markets and categorize studies into three broad classes: (1) oligopoly competition from a static perspective, (2) dynamics, convergence, and learning, and (3) collusion and policy.
Abstract: We present a general overview of papers that employ laboratory experiments to study oligopoly markets. We focus on papers that have been published since 2000. We categorize studies into three broad classes: (1) oligopoly competition from a static perspective, (2) dynamics, convergence, and learning, and (3) collusion and policy.
TL;DR: A survey of theoretical and empirical research on international migration with a particular emphasis on the links between trade theory and labour empirics is presented in this article. But this survey is limited to a single country.
Abstract: This paper surveys current theoretical and empirical research on international migration with a particular emphasis on the links between trade theory and labour empirics.
TL;DR: In this article, the authors selectively survey some of the more prominent laboratory experimental studies on asset market behavior, including market microstructure, pari-mutuel betting markets, characteristics of participants, the effect of information release, and studies of the CAPM pricing model.
Abstract: This paper selectively surveys some of the more prominent laboratory experimental studies on asset market behavior. The strands of literature considered are market microstructure, pari-mutuel betting markets, characteristics of participants, the effect of information release, and studies of the CAPM pricing model.
TL;DR: In this paper, the authors look at the laboratory experiments which provide part of the scientific justification for using prediction markets and discuss the robustness of prediction markets to various design features, discuss places where performance does not match rhetoric and briefly look at experimental comparisons of alternative information aggregating institutions.
Abstract: Prediction markets are becoming an ever more popular method for aggregating disparate information. Companies use prediction markets to forecast sales, release dates, and other internal activities. Recently, several well-known economists have argued that government ought to eliminate impediments to unleashing the power of prediction markets broadly. This survey paper looks at the laboratory experiments which provide part of the scientific justification for using prediction markets. These systems work because people who have private knowledge can use this “insider information” in the market, but doing so causes the price to reflect these data. Starting with early experiments that show markets can, under certain circumstances, aggregate information, we discuss the robustness of prediction markets to various design features. We also discuss places where performance does not match rhetoric and briefly look at experimental comparisons of alternative information aggregating institutions. Another issue consistently raised regarding the implementation of prediction markets is the degree to which traders can manipulate prices and thus the information gleaned. By following a series of experiments on manipulation, we present the circumstances that are and are not sufficient for manipulation attempts to be successful. Finally, we offer suggestions on where we believe future experiments are needed in this area.
TL;DR: In this paper, the authors survey experimental research on multiunit auctions with an emphasis on topics that may be of a unifying interest to experimental, as well as theoretical and empirical economists.
Abstract: We survey experimental research on multiunit auctions with an emphasis on topics that may be of a unifying interest to experimental, as well as theoretical and empirical economists. Topics include static and dynamic multiunit auctions; combinatorial auctions and efficient auction design; simultaneous and sequential auctions; bidder asymmetry and endogenous entry, and collusion in auctions. We also discuss behavioral regularities observed in multiunit auction experiments.
TL;DR: In this article, the authors review the economic literature on the role of fees in patent systems and present new stylized facts on patent fees of 30 patent offices worldwide, showing that application fees are generally lower than renewal fees, and renewal fees increase more than proportionally with patent age.
Abstract: This paper reviews the economic literature on the role of fees in patent systems. Two main research questions are usually addressed: the impact of patent fees on the behavior of applicants and the question of optimal fees. Studies in the former group confirm that a range of fees affect the behavior of applicants and suggest that a patent is an inelastic good. Studies in the latter group provide grounds for both low and high application (or pre-grant) fees and renewal (or post-grant) fees, depending on the structural context and policy objectives. The paper also presents new stylized facts on patent fees of 30 patent offices worldwide. It is shown that application fees are generally lower than renewal fees, and renewal fees increase more than proportionally with patent age. © 2012 John Wiley & Sons Ltd.
TL;DR: A review of empirical studies showed that financial liberalization has had diverse and contrasting effects on savings, investment and economic growth in Sub-Saharan Africa as discussed by the authors, and that the evidence on the effect on economic growth is inconclusive as different studies find contrasting results.
Abstract: Beginning from the early 1980s countries in Sub-Saharan Africa embarked on financial liberalization policies with a view to reversing the ill-effects of financial repression. This paper provides a survey of financial liberalization in Sub-Saharan African countries over the period 1980 to 2004. Our review of empirical studies showed that financial liberalization has had diverse and contrasting effects on savings, investment and economic growth. Most studies found a significant positive effect of financial liberalization on investment whereas its effect on savings has been largely insignificant. The evidence on the effect on economic growth is inconclusive as different studies find contrasting results. It is found that financial liberalization policies have not had the desired and expected results as both financial and macroeconomic variables have not improved following financial liberalization in these countries. This calls for a rethinking of financial liberalization in Sub-Saharan African countries. It is important that financial liberalization is carried out in a stable macroeconomic environment. In addition to this, there should be a building and reform of institutions and the strengthening of prudential regulation. Following this, financial liberalization can be embarked upon but it must be properly sequenced and not rushed.
TL;DR: Experiments have provided significant insights on the implications of different designs on market outcomes and the lessons learned have helped improve academic debate and the interaction between policy makers and researchers as discussed by the authors, which has helped to improve academic debates and improve interaction between researchers and policy makers.
Abstract: In recent years, some of the most influential policies have been either tested or evaluated using experimental methods. Experiments have provided significant insights on the implications of different designs on market outcomes and the lessons learned have helped improve academic debate and the interaction between policy makers and researchers. In this paper, we provide an overview of experiments relating to environmental markets. Expenditure on environmental programs has been growing in importance yet it is controversial in current times due to the fiscal cuts around the world. Finding cost-effective ways of reaching environmental goals is thus an objective of most governments. Research using experiments can help isolate how individuals and regulators would respond to incentives and therefore identify the most effective programs.
TL;DR: A survey on the existing methods used to quantify the distance puzzle can be found in this article, where a meta-analysis on existing gravity papers and the implementation of recent econometric developments, all on a well-specified gravity equation both in cross-section and panel data.
Abstract: The ‘distance effect' measuring the elasticity of trade flows to distance has been found to be rising since the early 1970s in a host of studies based on the gravity model, leading observers to call it the ‘distance puzzle'. However, this puzzle is regularly challenged by new developments in the specification of the gravity equation or in its estimations. We propose an original survey on the existing methods used to quantify the distance puzzle – basically the computation of an average distance of trade, a meta-analysis on existing gravity papers and the implementation of recent econometric developments, all on a well-specified gravity equation both in cross-section and panel data. We apply all these methods to a unique large database (124 countries from 1970 to 2006). It appears that if all these new developments can change the amplitude of the increase in the trade elasticity to distance, none solve the distance puzzle. We confirm the existence of this puzzle and identify that it only applies to low-income countries which exhibit a significant rising distance effect on their trade of around 18% between 1970 and 2006 while the distance ‘puzzle' for trade within richer countries disappears.
TL;DR: The literature in economics and related disciplines associated with the causes of childhood obesity are surveyed and synthesize the results to provide a better understanding of the explanations for the rising childhood obesity rates.
Abstract: Childhood obesity rates are rapidly rising in many countries. Since it is highly likely that obesity will persist into adulthood, current rates undermine the health and future of people in developed as well as developing countries. This public health epidemic carries significant economic, social as well as individual-level consequences and has become a research topic of significant interest for various disciplines including economics. We survey the literature in economics and related disciplines associated with the causes of childhood obesity and synthesize the results to provide a better understanding of the explanations for the rising childhood obesity rates. This is an important step in crafting effective policies to combat global childhood obesity trends.
TL;DR: The authors reviewed the literature on exchange rate target zones and their theoretical and empirical methodologies and examined whether they can be used to clarify to what extent this type of exchange rate regime could contribute to greater exchange rate stability.
Abstract: This work selectively reviews the literature on exchange rate target zones and their theoretical and empirical methodologies and examines whether they can be used to clarify to what extent this type of exchange rate regime could contribute to greater exchange rate stability. We discuss the main contributions of the first and second generations of exchange rate target zone models. In an attempt to reconcile the poor empirical performance of the Krugman model with the reality of exchange rate target zone regimes, this line of research integrates target zones with alternative underlying economic models, such as imperfect credibility, intra-marginal interventions and sticky price models. It was thus possible to understand the correlations observed between the exchange rate, its fundamentals determinants and the interest rate differential, and to explain the fact that the statistical distribution of the exchange rate is hump shaped rather than U shaped. This implies that the initial emphasis of target zone models on nonlinearities, ‘honeymoon effect’, ‘smooth pasting’ and marginal interventions has vanished. Exchange rate target zones are better described as similar to managed floating regimes with intra-marginal interventions, with some marginal interventions when the exchange rate reaches the edges of the floating band.
TL;DR: In this article, the authors review the theoretical and empirical literature on the impact of the affiliation of venture capital firms with a particular focus on the differences between Europe and the US, and highlight significant differences between these types of VC firms.
Abstract: The aim of this paper is to review the theoretical and empirical literature on the impact of the affiliation of venture capital (VC) firms with a particular focus on the differences between Europe and the US. A main characteristic of VC firms is their high level of involvement in the management of funded firms. However, the VC industry is composed of heterogeneous actors. The literature has studied to a great degree the independent funds that dominate the US market. Yet, there also exist VC funds affiliated with banks or with industrial firm, which can benefit from synergies with their parent corporation. Several studies have highlighted significant differences between these types of VC firms.
TL;DR: In this article, a review of common model selection algorithms (MSAs) discusses how they relate to each other and identifies factors that explain their relative performances, including the trade-off between type I and type II errors.
Abstract: This review surveys a number of common model selection algorithms (MSAs), discusses how they relate to each other and identifies factors that explain their relative performances. At the heart of MSA performance is the trade-off between type I and type II errors. Some relevant variables will be mistakenly excluded, and some irrelevant variables will be retained by chance. A successful MSA will find the optimal trade-off between the two types of errors for a given data environment. Whether a given MSA will be successful in a given environment depends on the relative costs of these two types of errors. We use Monte Carlo experimentation to illustrate these issues. We confirm that no MSA does best in all circumstances. Even the worst MSA in terms of overall performance - the strategy of including all candidate variables - sometimes performs best (viz., when all candidate variables are relevant). We also show how (1) the ratio of relevant to total candidate variables and (2) data-generating process noise affect relative MSA performance. Finally, we discuss a number of issues complicating the task of MSAs in producing reliable coefficient estimates.
TL;DR: In this article, a review of current thinking on the economics of international trade in mining products is provided, and the authors find no need to resort to the "new trade theory" to explain this.
Abstract: The increase in mineral price volatility since 1970 and worries about the impact of rapidly growing mineral exports on the economic growth of developing countries have created recent interest in mineral trade flows and policies. This paper provides a review of current thinking on the economics of international trade in mining products. Despite mining products’ importance in early formulations of trade theory, there have been relatively few studies that have specifically examined mining product trade flows. The limited evidence that exists supports the idea that factor endowment differences explain much mining product trade. There is some apparent South–South and intra-industry trade in mining products, but we find no need to resort to the ‘new trade theory’ to explain this. Given worries of substandard growth and development in mining-based economies, trade policies have been used to try to accelerate the movement towards resource-based manufacturing. In the light of recent evidence that mining product exporters have not suffered in the long-run from mining activity, these policies are likely to have been unwarranted. Nevertheless, there is some evidence that the more closed mining economies have had faster growth than the open mining economies, reflecting correction of a political economy trap that causes open mining economies to under-invest in education.
TL;DR: There is a growing literature on the "reference point" approach to incomplete contracts as formulated by Hart and Moore as mentioned in this paper, which has begun to be applied to the theory of the firm in 3 recent papers.
Abstract: There is a small but growing literature on the ‘reference point’ approach to incomplete contracts as formulated by Hart and Moore The reference point approach has begun to be applied to the theory of the firm in 3 recent papers This introduction reviews the main theoretical aspects of each of these papers It then discusses the relationship between the reference point approach to the firm, the transaction cost approach and the property rights approach Here it is argued that the reference point approach is a step back towards ex post inefficiencies, away from reliance on ex ante inefficiencies
TL;DR: A survey of the literature dealing with the thesis put forward by Dooley, Folkerts-Landau and Garber (DFG) that the present constellation of global exchange-rate arrangements constitutes a revived Bretton-Woods regime can be found in this article.
Abstract: This paper surveys the literature dealing with the thesis put forward by Dooley, Folkerts-Landau and Garber (DFG) that the present constellation of global exchange-rate arrangements constitutes a revived Bretton-Woods regime. DFG also argue that the revived regime will be sustainable, despite its large global imbalances. While much of the literature generated by DFG’s thesis points to specific differences between the earlier regime and revived regime that render the latter unstable, we argue that an underlying similarity between the two regimes renders the revived regime unstable. Specifically, to the extent that the present system constitutes a revived Bretton-Woods system, it is vulnerable to the same set of destabilizing forces -- including asset price bubbles and global financial crises -- that marked the latter years of the earlier regime, leading to its breakdown. We extend the Markov switching model to examine the relation between global liquidity and commodity prices. We find evidence of commodity-price bubbles in both the latter stages of the earlier Bretton-Woods regime and the revived regime.
TL;DR: In this article, the contributions in this special issue to the very large and rapidly growing research on experimental markets are highlighted. But they focus mainly on the following areas of research: asset markets, contests, environmental policy, frictions, general equilibrium, labor markets, multi-unit auctions, oligopoly markets and prediction markets.
Abstract: This paper highlights the contributions in this special issue to the very large and rapidly growing research on experimental markets. It contains ten surveys of different streams of research in this area including asset markets, contests, environmental policy, frictions, general equilibrium, labor markets, multi-unit auctions, oligopoly markets, and prediction markets.
TL;DR: In this paper, the authors present laboratory studies of GE environments which reveal that classical theories of dynamics do, in fact, organize market activity surprisingly well, and that instability should be accommodated within theory rather than circumscribed.
Abstract: General equilibrium (GE) theory faces several related challenges. Classical theories of out-of-equilibrium adjustment are intuitive but implausibly centralized. Further, standard restrictions on individual preferences place little structure on aggregate excess demand functions. Amongst other issues, this fact implies that economies can be unstable under classical dynamics, and thus instability appears to be an unavoidable feature of GE theory. This paper recounts laboratory studies of GE environments which reveal that classical theories of dynamics do, in fact, organize market activity surprisingly well. These experiments suggest that the Walrasian auctioneer, for example, appears to be a constructive abstraction, and that instability should be accommodated within theory rather than circumscribed. Laboratory applications of GE theory focused on issues beyond stability and dynamics are also briefly surveyed.