Showing papers in "Quarterly Journal of Economics in 2000"
TL;DR: In this paper, the authors consider how identity, a person's sense of self, affects economic outcomes and incorporate the psychology and sociology of identity into an economic model of behavior, and construct a simple game-theoretic model showing how identity can affect individual interactions.
Abstract: This paper considers how identity, a person's sense of self, affects economic outcomes. We incorporate the psychology and sociology of identity into an economic model of behavior. In the utility function we propose, identity is associated with different social categories and how people in these categories should behave. We then construct a simple game-theoretic model showing how identity can affect individual interactions. The paper adapts these models to gender discrimination in the workplace, the economics of poverty and social exclusion, and the household division of labor. In each case, the inclusion of identity substantively changes conclusions of previous economic analysis.
4,825 citations
TL;DR: In this article, the authors estimate a forward-looking monetary policy reaction function for the postwar United States economy, before and after Volcker's appointment as Fed Chairman in 1979, and compare some of the implications of the estimated rules for the equilibrium properties of ineation and output, using a simple macroeconomic model.
Abstract: We estimate a forward-looking monetary policy reaction function for the postwar United States economy, before and after Volcker’s appointment as Fed Chairman in 1979. Our results point to substantial differences in the estimated rule across periods. In particular, interest rate policy in the Volcker-Greenspan period appears to have been much more sensitive to changes in expected ineation than in the pre-Volcker period. We then compare some of the implications of the estimated rules for the equilibrium properties of ineation and output, using a simple macroeconomic model, and show that the Volcker-Greenspan rule is stabilizing.
3,914 citations
TL;DR: The authors found that when the contract offers money the environment is perceived as monetary, and participants respond in a qualitatively different way in monetary and non-monetary environments in a set of experiments.
Abstract: Economics seems largely based on the assumption that monetary incentives improve performance. By contrast, a large literature in psychology, including a rich tradition of experimental work, claims just the opposite. In this paper we present and discuss a set of experiments designed to test the effect of different monetary compensations on performance. In our experiments we find that whenever money is offered, a larger amount yields a higher performance. It is not true, however, that offering money always induces a higher performance: participants who were offered a small payoff gave a worse performance than those who were offered no compensation at all. These results suggest that the behavior of participants is influenced by their perception of the contract that is offered to them. When the contract offers money the environment is perceived as monetary, and participants respond in a qualitatively different way in monetary and non-monetary environments. In a different set of experiments we test subjects who, acting as principals, have to provide the appropriate incentive to agents. We show that principals do not anticipate the drastic difference in behavior. The vast majority of principals seem to think incorrectly that a larger compensation is unambiguously a better incentive.
2,094 citations
TL;DR: In this article, the authors studied the degree of heterogeneity in communities and found that participants who expressed views against racial mixing are less likely to participate in groups the more racially heterogeneous their community is.
Abstract: This paper studies what determines group formation and the degree of participation when the population is heterogeneous, both in terms of income and race or ethnicity. We are especially interested in whether and how much the degree of heterogeneity in communities influences the amount of participation in different types of groups. Using survey data on group membership and data on U. S. localities, we find that, after controlling for many individual characteristics, participation in social activities is significantly lower in more unequal and in more racially or ethnically fragmented localities. We also find that those individuals who express views against racial mixing are less prone to participate in groups the more racially heterogeneous their community is. These results are consistent with our model of group formation.
1,465 citations
TL;DR: The authors investigated the relationship between economic conditions and health and found that smoking and obesity increase when the economy strengthens, whereas physical activity is reduced and diet becomes less healthy, and there is some evidence that the unfavorable health effects of temporary upturns are partially or fully offset if the economic growth is longlasting.
Abstract: This study investigates the relationship between economic conditions and health. Total mortality and eight of the ten sources of fatalities examined are shown to exhibit a procyclical fluctuation, with suicides representing an important exception. The variations are largest for those causes and age groups where behavioral responses are most plausible, and there is some evidence that the unfavorable health effects of temporary upturns are partially or fully offset if the economic growth is long-lasting. An accompanying analysis of microdata indicates that smoking and obesity increase when the economy strengthens, whereas physical activity is reduced and diet becomes less healthy.
1,387 citations
TL;DR: The authors argued that these political reforms can be viewed as strategic decisions by the political elite to prevent widespread social unrest and revolution, while the extension of the franchise changes future political equilibria and acts as a commitment to redistribution.
Abstract: During the nineteenth century most Western societies extended voting rights, a decision that led to unprecedented redistributive programs. We argue that these political reforms can be viewed as strategic decisions by the political elite to prevent widespread social unrest and revolution. Political transition, rather than redistribution under existing political institutions, occurs because current transfers do not ensure future transfers, while the extension of the franchise changes future political equilibria and acts as a commitment to redistribution. Our theory also offers a novel explanation for the Kuznets curve in many Western economies during this period, with the fall in inequality following redistribution due to democratization. I. INTRODUCTION The nineteenth century was a period of fundamental political reform and unprecedented changes in taxation and redistribution. Britain, for example, was transformed from an ‘‘ oligarchy’’ run by an elite to a democracy. The franchise was extended in 1832 and then again in 1867 and 1884, transferring voting rights to portions of the society with no previous political representation. The decades after the political reforms witnessed radical social reforms, increased taxation, and the extension of education to the masses. Moreover, as noted by Kuznets, inequality, which was previously increasing, started to decline during this period: the Gini coefficient for income inequality in England and Wales had risen from 0.400 in 1823 to 0.627 in 1871, but fell to 0.443 in 1901. Two key factors in the reduction in inequality were the increase in the proportion of skilled workers [Williamson 1985] and the redistribution of income toward the poorer segments of the society. For example, taxes rose from 8.12 percent of National Product in 1867 to 18.8 percent by 1927, and the progressivity of the tax system increased substantially (see Lindert [1989]).
1,320 citations
TL;DR: In economics, it is now recognized that information is imperfect, obtaining information can be costly, there are important asymmetries of information, and the extent of information asymmetry is affected by actions of e rms and individuals.
Abstract: In the e eld of economics, perhaps the most important break with the past— one that leaves open huge areas for future work— lies in the economics of information. It is now recognized that information is imperfect, obtaining information can be costly, there are important asymmetries of information, and the extent of information asymmetries is affected by actions of e rms and individuals. This recognition deeply affects the understanding of wisdom inherited from the past, such as the fundamental welfare theorem and some of the basic characterization of a market economy, and provides explanations of economic and social phenomena that otherwise would be hard to understand. I. INTRODUCTION The century coming to a close has seen vast changes in economics in both ideas and methodology. Upon ree ection, it is remarkable, however, how many of the seeds of advances in this century were sowed in the previous. I would argue that perhaps the most important break with the past— one that leaves open huge areas for future work— lies in the economics of information. The recognition that information is imperfect, that obtaining information can be costly, that there are important asymmetries of information, and that the extent of information asymmetries is affected by actions of e rms and individuals, has had profound implications for the wisdom inherited from the past, and has provided explanations of economic and social phenomena that otherwise would be hard to understand. In this essay I wish to argue that information economics has had— directly and indirectly— a profound effect on how we think about economics today. Eighteenth and Nineteenth-Century Antecedents To be sure, Marshall and other nineteenth century economists talked about problems of imperfect information. But with one exception, discussions of information were obiter dicta, caveats at the end of the analysis; they were never at the center.
1,134 citations
TL;DR: In this article, an economic analysis of the intergenerational transmission of ethnic and religious traits through family socialization and marital segregation decisions is presented, and the authors show that the frequency of intragroup marriage (homogamy) and socialization rates of religious and ethnic groups depend on the group's share of the population: minority groups search more intensely for homogamous mates and spend more resources to socialize their offspring.
Abstract: This paper presents an economic analysis of the intergenerational transmission of ethnic and religious traits through family socialization and marital segregation decisions. Frequency of intragroup marriage (homogamy), as well as socialization rates of religious and ethnic groups, depend on the group's share of the population: minority groups search more intensely for homogamous mates, and spend more resources to socialize their offspring. This pattern generally induces a dynamics of the distribution of ethnic and religious traits which converges to a culturally heterogeneous stationary population. Existing empirical evidence bearing directly and indirectly on the implications of the model is discussed.
1,067 citations
TL;DR: In this paper, the authors identify the effects of class size on student achievement using longitudinal variation in the population associated with each grade in 649 elementary schools and use discrete jumps in class size that occur when a small change in enrollment triggers a maximum or minimum class size rule.
Abstract: I identify the effects of class size on student achievement using longitudinal variation in the population associated with each grade in 649 elementary schools. I use variation in class size driven by idiosyncratic variation in the population. I also use discrete jumps in class size that occur when a small change in enrollment triggers a maximum or minimum class size rule. The estimates indicate that class size does not have a statistically significant effect on student achievement. I rule out even modest effects (2 to 4 percent of a standard deviation in scores for a 10 percent reduction in class size).
1,013 citations
TL;DR: In this article, a subset of erms from work of Fazzari, Hubbard, and Petersen was used to evaluate the usefulness of investment-cash eow sensitivities for detecting enancing constraints.
Abstract: Arecent paper in this Journal by Kaplan and Zingales reexamines a subset of erms from work of Fazzari, Hubbard, and Petersen and criticizes the usefulness of investment-cash eow sensitivities for detecting enancing constraints We show that the Kaplan and Zingales theoretical model fails to capture the approach employed in the literature and thus does not provide an effective critique Moreover, we describe why their empirical classiecation system is eawed in identifying both whether erms are constrained and the relative degree of constraints across erm groups We conclude that their results do not support their conclusions about the usefulness of investment-cash eow sensitivities In a recent paper in this Journal Kaplan and Zingales {1997, hereinafter KZ} argue that investment-cash eow sensitivities do not provide useful evidence about the presence of enancing constraints Because KZ use a subset of the same erms and the same regressions as Fazzari, Hubbard, and Petersen {1988, hereinafter FHP} and claim {page 176} that FHP ‘‘can legitimately be considered the parent of all papers in this literature,’’ it is appropriate that we respond Based on a simple theoretical model, KZ reach the provocative conclusion {page 211} that ‘‘the investment-cash eow sensitivity criterion as a measure of enancial constraints is not well-grounded in theory’’ In Section I we show that the KZ model does not capture the theoretical approach employed in FHP and many subsequent studies Most of the KZ paper attempts to show that empirical investment-cash eow sensitivities do not increase monotonically with the degree of enancing constraints within the 49 low-dividend erms from the FHP sample In Section II we explain why the KZ classiecation of the degree of constraints is eawed in identifying both whether or not erms are constrained (absolute constraints) as well as the relative degree of constraints across ermsAs a result, we argue in Section III that there is no expected ex ante pattern for the
828 citations
TL;DR: In this article, the authors explain how the Fazzari et al. criticisms are either very supportive of the claims in earlier work by Kaplan and Zingales or incorrect, and conclude with a discussion of unanswered questions.
Abstract: Work by Kaplan and Zingales provides both theoretical arguments and empirical evidence that investment-cash flow sensitivities are not good indicators of financing constraints. Fazzari, Hubbard, and Petersen [this Journal] criticize those findings. In this note we explain how the Fazzari et al. criticisms are either very supportive of the claims in earlier work by Kaplan and Zingales or incorrect. We conclude with a discussion of unanswered questions.
TL;DR: In a partially reformed economy, distortions beget distortions as discussed by the authors, and the battle to capture, and then protect, these rents leads to the creation of new distortions, even as the reform process tries to move forward.
Abstract: In a partially reformed economy, distortions beget distortions. Segments of the economy that are freed from centralized control respond to the rent-seeking opportunities implicit in the remaining distortions of the economy. The battle to capture, and then protect, these rents leads to the creation of new distortions, even as the reform process tries to move forward. In this paper I illustrate this idea with a study of the People's Republic of China. Under the plan, prices were skewed so as to concentrate profits, and hence revenue, in industry. As control over factor allocations was loosened, local governments throughout the economy sought to capture these rents by developing high margin industries. Continued reform, and growing interregional competition between duplicative industries, threatened the profitability of these industrial structures, leading local governments to impose a variety of interregional barriers to trade. Thus, the reform process led to the fragmentation of the domestic market and the distortion of regional production away from patterns of comparative advantage.
TL;DR: In this paper, the authors developed a growth model characterized byability-biased technological transition in which the evolution of technology, education attainment, and wage inequality is consistent with the observed pattern in the United States and other advanced countries over the past several decades.
Abstract: Thispaper develops a growthmodel characterizedbyability-biasedtechnological transition in which the evolution of technology, education attainment, and wage inequality is consistent with the observed pattern in the United States and other advanced countries over the past several decades. It argues that an increase in the rate of technological progress raises the return to ability and simultaneously generates an increase in wage inequality between and within groups of skilled and unskilled workers, an increase in average wages of skilled workers, a temporary decline in average wages of unskilled workers, an increase in education, and a productivity transitory slowdown.
TL;DR: The authors empirically examined the role of social networks in welfare participation using data on language spoken at home to better infer networks within an area and found that being surrounded by others who speak the same language increases welfare use more for those from high welfare-using language groups.
Abstract: We empirically examine the role of social networks in welfare participation using data on language spoken at home to better infer networks within an area. Our empirical strategy asks whether being surrounded by others who speak the same language increases welfare use more for those from high welfare-using language groups. This methodology allows us to include local area and language group fixed effects and to control for the direct effect of being surrounded by one’s language group; these controls eliminate many of the problems in previous studies. The results strongly confirm the importance of networks in welfare participation.
TL;DR: In this article, the consequences of hospital competition for Medicare beneficiaries' heart attack care from 1985 to 1994 were studied, where relatively exogenous determinants of hospital choice such as travel distances influence the competitiveness of hospital markets, and how hospital competition interacts with the influence of managed-care organizations to affect the key determinant of social welfare.
Abstract: We study the consequences of hospital competition for Medicare beneficiaries' heart attack care from 1985 to 1994. We examine how relatively exogenous determinants of hospital choice such as travel distances influence the competitiveness of hospital markets, and how hospital competition interacts with the influence of managed-care organizations to affect the key determinants of social welfare—expenditures on treatment and patient health outcomes. In the 1980s the welfare effects of competition were ambiguous; but in the 1990s competition unambiguously improves social welfare. Increasing HMO enrollment over the sample period partially explains the dramatic change in the impact of hospital competition.
TL;DR: This article investigated whether this trend can be explained by increasing urbanization of the college educated or the growth of dual career households and the resulting severity of the colocation problem and argued that the latter explanation is the primary one.
Abstract: College educated couples are increasingly located in large metropolitan areas. These areas were home to 32 percent of all college educated couples in 1940, 39 percent in 1970, and 50 percent in 1990. We investigate whether this trend can be explained by increasing urbanization of the college educated or the growth of dual career households and the resulting severity of the colocation problem. We argue that the latter explanation is the primary one. Smaller cities may therefore experience reduced inflows of human capital relative to the past and thus become poorer.
TL;DR: In this article, the authors used panel data on sixteen main Indian states from 1958 to 1992 to consider whether the large volume of land reforms as have been legislated have had an appreciable impact on growth and poverty.
Abstract: In recent times there has been a renewed interest in relationships between redistribution, growth and welfare. Land reforms have been central to strategies to improve the asset base of the poor in developing countries thought their effectiveness has been hindered by political constraints on implementation. In this paper we use panel data on the sixteen main Indian states from 1958 to 1992 to consider whether the large volume of land reforms as have been legislated have had an appreciable impact on growth and poverty. The evidence presented suggests that land reforms do appear to be associated with poverty reduction.
TL;DR: In this article, the authors examine evidence of the role that reputation plays in determining contractual outcomes in the Indian customized software industry, using a data set collected containing detailed information on 230 projects carried out by 125 software firms.
Abstract: This paper examines evidence of the role that reputation plays in determining contractual outcomes. We conduct an empirical analysis of the Indian customized software industry, using a data set we collected containing detailed information on 230 projects carried out by 125 software firms. We propose a model ofthe industry where reputation determines contractual outcomes. The evidence supports the view that reputation matters. Ex ante contracts, as well as the outcome after ex post renegotiation, vary with firms' characteristics plausibly associated with reputation. This holds after controlling for project, client, and firm characteristics.
TL;DR: In this article, a social interaction approach explains why fathers with families in poverty choose yeshiva over work, yet attendance typically continues long after exemption, indicating commitment to the community which provides mutual insurance to members.
Abstract: Israeli Ultra-Orthodox men study full-time in yeshiva until age 40 on average. Why do fathers with families in poverty choose yeshiva over work? Draft deferments subsidize yeshiva attendance, yet attendance typically continues long after exemption. Fertility rates are high (TFR = 7.6) and rising. A social interaction approach explains these anomalies. Yeshiva attendance signals commitment to the community, which provides mutual insurance to members. Prohibitions strengthen communities by effectively taxing real wages, inducing high fertility. Historically, the incursion of markets into traditional communities produces Ultra-Orthodoxy. Subsidies induce dramatic reductions in labor supply and unparalleled increases in fertility, illustrating extreme responses social groups may have to interventions.
TL;DR: The results reveal that the critical difference between the three types of hospitals owes to the soft budget constraint of government-owned institutions and the decision-makers in private not-for-profit hospitals are just as responsive to financial incentives and are no more altruistic than their counterparts in profit-maximizing facilities.
Abstract: The hospital market is served by firms that are private for-profit, private not-for-profit, and government-owned and operated. I use a plausibly exogenous change in hospital financing that was intended to improve medical care for the poor to test three theories of organizational behavior. I find that the critical difference between the three types of hospitals is caused by the soft budget constraint of government-owned institutions. The decision-makers in private not-for-profit hospitals are just as responsive to financial incentives and are no more altruistic than their counterparts in profit-maximizing facilities. My final set of results suggests that the significant increase in public medical spending examined in this paper has not improved health outcomes for the indigent. I. INTRODUCTION The hospital market is served by firms that are private for-profit, private not-for-profit, and publicly owned and operated. In this paper I examine how a hospital's type of ownership influences its response to profitable opportunities that are created by changes in government policy. The policy change that I exploit was designed to improve the quality of medical care for lowincome individuals by significantly increasing hospitals' financial incentives to treat them. This program also substantially increased the revenues of those hospitals that had been serving a disproportionate share of the indigent. I use this plausibly exogenous change in government policy to test three different theories of organizational behavior, and then to assess the impact of hospital behavioral responses on health outcomes. The response of organizations to changes in government policy will have an important impact on the consequences of these policies. This is likely to be especially true in the medical sector, in which the federal, state, and local governments contract directly
TL;DR: The major contributions of twentieth century econometrics to knowledge were the definition of causal parameters within well-defined economic models in which agents are constrained by resources and markets and causes are interrelated, the analysis of what is required to recover causal parameters from data (the identification problem), and clarification of the role of causal parameter in policy evaluation and in forecasting the effects of policies never previously experienced as discussed by the authors.
Abstract: The major contributions of twentieth century econometrics to knowledge were the definition of causal parameters within well-defined economic models in which agents are constrained by resources and markets and causes are interrelated, the analysis of what is required to recover causal parameters from data (the identification problem), and clarification of the role of causal parameters in policy evaluation and in forecasting the effects of policies never previously experienced. This paper summarizes the development of these ideas by the Cowles Commission, the response to their work by structural econometricians and VAR econometricians, and the response to structural and VAR econometrics by calibrators, advocates of natural and social experiments, and by nonparametric econometricians and statisticians. This paper considers the definition and identification of causal parameters in economics and their role in econometric policy analysis. It assesses different research programs designed to recover causal parameters from data. At the beginning of this century, economic theory was mainly intuitive, and empirical support for it was largely anecdotal. At the end of the century, economics has a rich array of formal models and a high-quality database. Empirical regularities motivate theory in many areas of economics, and data are routinely used to test theory. Many economic theories have been developed as measurement frameworks to suggest what data should be collected and how they should be interpreted. Econometric theory was developed to analyze and interpret economic data. Most econometric theory adapts methods originally developed in statistics. The major exception to this rule is the econometric analysis of the identification problem and the companion analyses of structural equations, causality, and economic policy evaluation. Although an economist did not invent the phrase, ‘‘correlation does not imply causation,’’ 1 economists clari
TL;DR: In this paper, the prevalence of shirking within a large Italian bank appears to be characterized by significant regional differentials, in particular absenteeism and misconduct episodes are substantially more prevalent in the south.
Abstract: The prevalence of shirking within a large Italian bank appears to be characterized by significant regional differentials. In particular, absenteeism and misconduct episodes are substantially more prevalent in the south. We consider a number of potential explanations for this fact: different individual backgrounds; group-interaction effects; sorting of workers across regions; differences in local attributes; different hiring policies; and discrimination against southern workers. Our analysis suggests that individual backgrounds, group-interaction effects, and sorting effects contribute to explaining the north-south shirking differential. None of the other explanations appears to be of first-order importance. I. INTRODUCTION Whether individual behavior is determined by group interactions or by individual background is undoubtedly a fundamental question for the social sciences. This question presented itself forcefully when we stumbled onto the following piece of evidence: there appear to be significant regional differentials in the prevalence of shirking among the employees of a large Italian bank. In particular, absenteeism and misconduct episodes are considerably more frequent in the southern branches of the bank. In this paper we examine several potential explanations for this fact. First, individual preferences for shirking versus working may differ according to one's region of hirth. We will refer to this hj^othesis as one of different "individual hackgrounds." The second possibility is one of locational sorting: low-shirking types may tend to migrate to the north, high-shirking types may tend to migrate to the south, or hoth. Third, the northern and southern
TL;DR: In this paper, the authors argue that if the central bank is non-commodating, sufficiently large unions, bargaining independently, have an incentive to moderate sectoral money wages, and thereby expected real wages.
Abstract: Monetary rules matter for the equilibrium rate of employment when the number of price-wage setters is small, even when assuming rational expectations, complete information, central bank precommitment, and absence of nominal rigidities. If the central bank is nonaccommodating, sufficiently large unions, bargaining independently, have an incentive to moderate sectoral money wages, and thereby expected real wages. The result is an increase in the real money supply, and hence higher demand and employment. This does not hold with accommodating monetary policy since unions' wage decisions cannot then affect the real money supply. A similar argument holds for large monopolistically competitive price setters.
TL;DR: Two basic tenets of the Walrasian model, behavior based on self-interested exogenous preferences and complete and costless contracting have recently come under critical scrutiny as discussed by the authors, and it follows that economics must become more behavioral and more institutional.
Abstract: Two basic tenets of the Walrasian model, behavior based on self-interested exogenous preferences and complete and costless contracting have recently come under critical scrutiny. First, social norms and psychological dispositions extending beyond the selfish motives of Homo economicus may have an important bearing on outcomes, even in competitive markets. Second, market outcomes depend on strategic interactions in which power in the political sense is exercised. It follows that economics must become more behavioral and more institutional. We can return to these themes of the classical tradition, now equipped with the more powerful mathematical tools developed over the past century.
TL;DR: In this article, the effect of local sales taxes on Internet commerce is examined and the results suggest that people living in high sales taxes locations are significantly more likely to buy online. But the results are quite robust and cannot be explained by unobserved technological sophistication, shopping costs, or other alternative explanations.
Abstract: The rapid rise in sales over the Internet and the fact that most Internet buyers pay no sales tax has ignited a considerable debate over taxes and the Internet. This paper uses new data on the purchase decisions of approximately 25,000 online users to examine the effect of local sales taxes on Internet commerce. The results suggest that, controlling for observable characteristics, people living in high sales taxes locations are significantly more likely to buy online. The results are quite robust and cannot be explained by unobserved technological sophistication, shopping costs, or other alternative explanations. The magnitudes in the paper suggest that applying existing sales taxes to Internet commerce might reduce the number of online buyers by up to 24 percent.
TL;DR: In this paper, the authors introduce two centralized clearinghouse mechanisms, one of which is successfully used to halt this kind of unraveling in a number of labor markets, while the other has failed.
Abstract: We create an environment in which congestion forces agents to match inefficiently early. We then introduce one of two centralized clearinghouse mechanisms. One of these has been successfully used to halt this kind of unraveling in a number of labor markets, while the other has failed. When it is costlyfore rms and workers to be mismatched compared with the costs of matching early, the experimental observations reproduce the e eld observations. Furthermore, the experiment permits us to observe the transition between a decentralized and a centralized market, both when the centralized market fails to control unraveling and when it succeeds, at a level of detail unavailable in e eld data.
TL;DR: In this paper, the authors test the labor market signaling hypothesis for the General Educational Development (GED) equivalency credential and find that the GED signal increases the earnings of young white dropouts by 10 to 19 percent.
Abstract: This paper tests the labor market signaling hypothesis for the General Educational Development (GED) equivalency credential. Using a unique data set containing GED test scores and Social Security Administration (SSA) earnings data, we exploit variation in GED status generated by differential state GED passing standards to identify the signaling value of the GED, net of human capital effects. Our results indicate that the GED signal increases the earnings of young white dropouts by 10 to 19 percent. We find no statistically significant effects for minority dropouts.
TL;DR: In this article, the authors consider the interpretation of evidence from social experiments when persons randomized out of a program being evaluated have good substitutes for it, and when those randomized into a program drop out to pursue better alternatives.
Abstract: This paper considers the interpretation of evidence from social experiments when persons randomized out of a program being evaluated have good substitutes for it, and when persons randomized into a program drop out to pursue better alternatives. Using data from an experimental evaluation of a classroom training program, we document the empirical importance of control group substitution and treatment group dropping out. Evidence that one program is ineffective relative to close substitutes is not evidence that the type of service provided by all of the programs is ineffective, although that is the way experimental evidence is often interpreted.
TL;DR: In this article, the authors examine the demand for on-board computers in trucking, distinguishing between their incentive and resource-allocation-improving capabilities, and find that monitoring's incentive benefits are high when perquisite-taking is attractive to drivers, driver effort is important, and verifying drivers' actions to insurers is valuable.
Abstract: This paper examines the demand for on-board computers in trucking, distinguishing between their incentive- and resource-allocation-improving capabilities. I find that monitoring's incentive benefits are high when perquisite-taking is attractive to drivers, driver effort is important, and verifying drivers' actions to insurers is valuable. These results are consistent with agency theory and suggest that networking applications will raise the productivity and pay of difficult-toevaluate workers. I also find that monitoring's benefits are disproportionately resource-allocation-related when managerial decisions are least constrained. This suggests that networking applications' monitoring capabilities raise the returns to delegation when resource allocation decisions are routine and lower them when they are not.
TL;DR: The authors compare free trade reached through expanding regional trading blocs to free trade accomplished by multilateral negotiation, and find that the outcomes are different with sunk costs, and that world welfare during free trade is greater when it is achieved by the regional path.
Abstract: We compare free trade reached through expanding regional trading blocs to free trade accomplished by multilateral negotiation. With sunk costs, the outcomes are different. Trade in an imperfectly competitive good flows disproportionately more between the original members of a regional agreement even after free trade is reached. They secure a higher welfare level from regionalism than from free trade achieved multilaterally; nonmembers, however, reach a lower welfare level. A surprising result is that world welfare during free trade is greater when it is achieved by the regional path. We conclude with some empirical evidence from the European Union that is consistent with the model.