Showing papers in "The American Economic Review in 2006"
TL;DR: In this article, an examination of firms in 47 countries showed a widespread overlap of controlling shareholders and top officers who are connected with national parliaments or governments, particularly in countries with higher levels of corruption, with barriers to foreign investment, and with more transparent systems.
Abstract: Examination of firms in 47 countries shows a widespread overlap of controlling shareholders and top officers who are connected with national parliaments or governments, particularly in countries with higher levels of corruption, with barriers to foreign investment, and with more transparent systems. Connections are diminished when regulations set more limits on official behavior. Additionally, I show that the announcement of a new political connection results in a significant increase in value.
2,440 citations
TL;DR: This paper developed a theory of prosocial behavior that combines heterogeneity in individual altruism and greed with concerns for social reputation or self-respect, and analyzed the socially optimal level of incentives and how monopolistic or competitive sponsors depart from it.
Abstract: We develop a theory of prosocial behavior that combines heterogeneity in individual altruism and greed with concerns for social reputation or self-respect. Rewards or punishments (whether material or imagerelated) create doubt about the true motive for which good deeds are performed and this “overjustification effect” can induce a partial or even net crowding out of prosocial behavior by extrinsic incentives. We also identify the settings that are conducive to multiple social norms and more generally those that make individual actions complements or substitutes, which we show depends on whether stigma or honor is (endogenously) the dominant reputational concern. Finally, we analyze the socially optimal level of incentives and how monopolistic or competitive sponsors depart from it. Sponsor competition is shown to potentially reduce social welfare.
2,094 citations
TL;DR: In this article, the relative importance of efficiency concerns, maximin preferences, and inequality aversion, as well as the relative performance of the fairness theories by Gary E Bolton and Axel Ockenfels and by Ernst Fehr and Klaus M. Schmidt were compared.
Abstract: We present simple one-shot distribution experiments comparing the relative importance of efficiency concerns, maximin preferences, and inequality aversion, as well as the relative performance of the fairness theories by Gary E Bolton and Axel Ockenfels and by Ernst Fehr and Klaus M. Schmidt. While the Fehr-Schmidt theory performs better in a direct comparison, this appears to be due to being in line with maximin preferences. More importantly, we find that a combination of efficiency concerns, maximin preferences, and selfishness can rationalize most of the data while the Bolton-Ockenfels and Fehr-Schmidt theories are unable to explain important patterns.
1,228 citations
TL;DR: In this paper, the authors analyze a dataset from three U.S. health clubs with information on both the contractual choice and the day-to-day attendance decisions of 7,752 members over three years, finding that consumers who choose a monthly contract are 17 percent more likely to stay enrolled beyond one year than users committing for a year.
Abstract: How do consumers choose from a menu of contracts? We analyze a novel dataset from three U.S. health clubs with information on both the contractual choice and the day-to-day attendance decisions of 7,752 members over three years. The observed consumer behavior is difficult to reconcile with standard preferences and beliefs. First, members who choose a contract with a flat monthly fee of over $70 attend on average 4.3 times per month. They pay a price per expected visit of more than $17, even though they could pay $10 per visit using a 10-visit pass. On average, these users forgo savings of $600 during their membership. Second, consumers who choose a monthly contract are 17 percent more likely to stay enrolled beyond one year than users committing for a year. This is surprising because monthly members pay higher fees for the option to cancel each month. We also document cancellation delays and attendance expectations, among other findings. Leading explanations for our findings are overconfidence about future self-control or about future efficiency. Overconfident agents overestimate attendance as well as the cancellation probability of automatically renewed contracts. Our results suggest that making inferences from observed contract choice under the rational expectation hypothesis can lead to biases in the estimation of consumer preferences.
1,102 citations
TL;DR: In this paper, a simple experimental principal-agent game, where the principal decides whether or not to control the agent by implementing a minimum performance requirement before the agent chooses a productive activity, is studied.
Abstract: In this paper we analyze the behavioral consequences of control on motivation. Wenstudy a simple experimental principal-agent game, where the principal decides whethernhe controls the agent by implementing a minimum performance requirement before the agent chooses a productive activity. Our main finding is that a principal's decisionnto control has a negative impact on the agent's motivation. While there is substantial individual heterogeneity among agents, most agents reduce their performance as a response to the principals' controlling decision. The majority of the principals seem to anticipate the hidden costs of control and decide not to control. In several treatmentsnwe vary the enforceable level of control and show that control has a non-monotonic effect on the principal's payoff. In a variant of our main treatment principals can also set wages. In this gift-exchange game control partly crowds out agents' reciprocity. The economic importance and possible applications of our experimental results are further illustrated by a questionnaire study which reveals hidden costs of control in various real-life labor scenarios. We also explore possible reasons for the existence of hidden costs of control. Agents correctly believe that principals who control expect to get less than those who don't. When asked for their emotional perception of control, most agents who react negatively say that they perceive the controlling decision as a signal of distrust and a limitation of their choice autonomy.
1,014 citations
TL;DR: This article showed that a large fraction of the growth in residual wage inequality between 1973 and 2003 is due to spurious composition effects, which are linked to the secular increase in the level of experience and education of the workforce, two factors associated with higher within group wage dispersion.
Abstract: Using data from the May and Outgoing Rotation Group (ORG) supplements of the CPS, this paper shows that a large fraction of the growth in residual wage inequality between 1973 and 2003 is due to spurious composition effects. These composition effects are linked to the secular increase in the level of experience and education of the workforce, two factors associated with higher within-group wage dispersion. I also show that both the level and growth in residual wage inequality are overstated in March CPS data that have been used in most previous studies. Measured wages are noisier in the March than in the May/ORG CPS because the March CPS does not measure directly the hourly wages of workers paid by the hour. The extent of measurement error in CPS wages also increases over time. Once these factors are corrected for, I find that residual wage inequality only accounts for a small share of the overall growth in wage inequality. Furthermore, all of the growth in residual wage inequality occurs during the 1980s. This closely mirrors the pattern of change in “between-group” wage differentials like the college-high school wage premium. Overall, the magnitude and timing of the growth in residual wage inequality provides little evidence of a pervasive increase in the demand for skill due, for instance, to skill-biased technological change.
972 citations
TL;DR: In this article, the authors explored the relationship between the development of modern labor economics and the reality of women's changing economic role and explored whether the revolution has stalled or is being reversed.
Abstract: The modern economic role of women emerged in four phases. The first three were evolutionary; the last was revolutionary. Phase I occurred from the late nineteenth century to the 1920s; Phase II was from 1930 to 1950; Phase III extended from 1950 to the late 1970s; and Phase IV, the "quiet revolution," began in the late 1970s and is still ongoing. Three aspects of women's choices distinguish the evolutionary from the revolutionary phases: horizon, identity, and decision-making. The evolutionary phases are apparent in time-series data on labor force participation. The revolutionary phase is discernible using time-series evidence on women's more predictable attachment to the workplace, greater identity with career, and better ability to make joint decisions with their spouses. Each of these series has a sharp break or inflection point signifying social and economic change. These changes, moreover, coincide by birth cohort or period. The relationship between the development of modern labor economics and the reality of women's changing economic role is explored. The paper concludes by assessing whether the revolution has stalled or is being reversed. Women who graduated college in the early 1980s did not "opt-out,"but recent cohorts are too young to evaluate.
951 citations
TL;DR: In this paper, a multivariate model, identifying monetary policy and allowing for simultaneity and regime switching in coefficients and variances, is confronted with U.S. data since 1959.
Abstract: Working Paper 2004-14 June 2004 Abstract: A multivariate model, identifying monetary policy and allowing for simultaneity and regime switching in coefficients and variances, is confronted with U.S. data since 1959. The best fit is with a model that allows time variation in structural disturbance variances only. Among models that also allow for changes in equation coefficients, the best fit is for a model that allows coefficients to change only in the monetary policy rule. That model allows switching among three main regimes and one rarely and briefly occurring regime. The three main regimes correspond roughly to periods when most observers believe that monetary policy actually differed, and the differences in policy behavior are substantively interesting, though statistically ill determined. The estimates imply monetary targeting was central in the early '80s but was also important sporadically in the '70s. The changes in regime were essential neither to the rise in inflation in the '70s nor to its decline in the '80s. JEL classification: E52, E47, C53 Key words: counterfactuals, Lucas critique, policy rule, monetary targeting, simultaneity, volatility, model comparison I. THE DEBATE OVER MONETARY POLICY CHANGE In an influential paper, Clarida, Gali and Gertler 2000 (CGG) presented evidence that US monetary policy changed between the 1970's and the 1980's, indeed that in the 70's it was drastically worse. They found that the policy rule apparently followed in the 70's was one that, when embedded in most stochastic general equilibrium models, would imply non-uniqueness of the equilibrium and hence vulnerability of the economy to "sunspot" fluctuations of arbitrarily large size. Their estimated policy rule for the later period, on the other hand, eliminated this indeterminacy. These results are a possible explanation of the volatile and rising inflation of the 70's and of its subsequent decline. The CGG analysis has two important weaknesses. One is that it fails to account for stochastic volatility. US macroeconomic variables, and particularly the federal funds rate, have gone through periods of tranquility and of agitation, with forecast error variances varying greatly from period to period. Ignoring such variation does not lead to inconsistent estimates of model parameters when the forecasting equations themselves are constant, but it strongly biases--toward a finding of changed parameters--tests of the stability of the forecasting equations. The other weakness is that the CGG analysis rests on powerful and implausible identifying assumptions. They require that we accept that the response of the monetary authority to expected future inflation and output does not depend on the recent history of inflation, money growth, or output. It is hard to understand why this should be so, especially in the 70's, when monetarism was a prominent theme in policy debates, Congress was requiring reports from the Fed of projected time paths of monetary aggregates, and financial markets were reacting sensitively to weekly money supply numbers. The requirement for existence and uniqueness of equilibrium in dynamic models is that the monetary policy rule show a more than unit response of interest rates to the sum of the logs of all nominal variables that appear on the right-hand side of the reaction function. If we force a particular measure of expected future inflation to proxy for all the nominal variables that actually appear independently in the reaction function, we are bound to get distorted conclusions. On the one hand, because expected future inflation will be a "noisy" measure of the full set of nominal influences on policy, we might get downward bias in our estimates from the usual errorsin-variables effect. On the other hand, to the extent that expected future inflation (like most expected future values) shows less variation than current nominal variables, we could find a mistaken scaling up of coefficients. …
930 citations
TL;DR: The authors analyzes a marked change in the evolution of the U.S. wage structure over the past fifteen years: divergent trends in upper-tail and lower-tail (50/10) wage inequality, with employment polarizing into high-wage and low-wage jobs at the expense of middle-wage work.
Abstract: This paper analyzes a marked change in the evolution of the U.S. wage structure over the past fifteen years: divergent trends in upper-tail (90/50) and lower-tail (50/10) wage inequality. We document that wage inequality in the top half of distribution has displayed an unchecked and rather smooth secular rise for the last 25 years (since 1980). Wage inequality in the bottom half of the distribution also grew rapidly from 1979 to 1987, but it has ceased growing (and for some measures actually narrowed) since the late 1980s. Furthermore we find that occupational employment growth shifted from monotonically increasing in wages (education) in the 1980s to a pattern of more rapid growth in jobs at the top and bottom relative to the middles of the wage (education) distribution in the 1990s. We characterize these patterns as the %u201Cpolarization%u201D of the U.S. labor market, with employment polarizing into high-wage and low-wage jobs at the expense of middle-wage work. We show how a model of computerization in which computers most strongly complement the non-routine (abstract) cognitive tasks of high-wage jobs, directly substitute for the routine tasks found in many traditional middle-wage jobs, and may have little direct impact on non-routine manual tasks in relatively low-wage jobs can help explain the observed polarization of the U.S. labor market.
899 citations
TL;DR: The authors examined the impact of inherited control on firms' performance and found that firms where incoming CEOs are related to the departing CEO, to a founder, or to a large shareholder by either blood or marriage underperform in terms of operating profitability and market-to-book ratios, relative to firms that promote unrelated CEOs.
Abstract: I use data from chief executive officer (CEO) successions to examine the impact of inherited control on firms' performance. I find that firms where incoming CEOs are related to the departing CEO, to a founder, or to a large shareholder by either blood or marriage underperform in terms of operating profitability and market-to-book ratios, relative to firms that promote unrelated CEOs. Consistent with wasteful nepotism, lower performance is prominent in firms that appoint family CEOs who did not attend "selective" undergraduate institutions. Overall, the evidence indicates that nepotism hurts performance by limiting the scope of labor market competition.
833 citations
TL;DR: This paper found that the benefits from compulsory schooling are very large whether these laws have an impact on a majority or a minority of those exposed, and they used regression discontinuity design instead of previous estimates that rely on difference-in-differences methodology or relatively weak instruments.
Abstract: The change to the minimum school-leaving age in the United Kingdom from 14 to 15 had a powerful and immediate effect that redirected almost half the population of 14-year-olds in the mid-twentieth century to stay in school for one more year. The magnitude of this impact provides a rare opportunity to (a) estimate local average treatment effects (LATE) of high school that come close to population average treatment effects (ATE); and (b) estimate returns to education using a regression discontinuity design instead of previous estimates that rely on difference-in-differences methodology or relatively weak instruments. Comparing LATE estimates for the United States and Canada, where very few students were affected by compulsory school laws, to the United Kingdom estimates provides a test as to whether instrumental variables (IV) returns to schooling often exceed ordinary least squares (OLS) because gains are high only for small and peculiar groups among the more general population. I find, instead, that the benefits from compulsory schooling are very large whether these laws have an impact on a majority or minority of those exposed.
TL;DR: In this article, a simple "dual self" model is proposed to explain several empirical regularities, including the apparent time inconsistency that has motivated models of quasi-hyperbolic discounting and Rabin's paradox of risk aversion in the large and small.
Abstract: We propose that a simple "dual-self" model gives a unified explanation for several empirical regularities, including the apparent time inconsistency that has motivated models of quasi-hyperbolic discounting and Rabin’s paradox of risk aversion in the large and small. The model also implies that self-control costs imply excess delay, as in the O'Donoghue and Rabin models of quasi-hyperbolic utility, and it explains experimental evidence that increased cognitive load makes temptations harder to resist. The base version of our model is consistent with the Gul-Pesendorfer axioms, but we argue that these axioms must be relaxed to account for the effect of cognitive load.
TL;DR: In this paper, the authors develop a model of democratic politics in which media capture is endogenous and reveal insights into the features of the media market that determine the ability of the government to exercise such capture and hence to influence political outcomes.
Abstract: It has long been recognized that the media play an essential role in government accountability. However, even in the absence of censorship, the government may in‡uence news content by maintaining a “cozy” relationship with the media. This paper develops a model of democratic politics in which media capture is endogenous. The model o¤ers insights into the features of the media market that determine the ability of the government to exercise such capture and hence to in‡uence political outcomes.
TL;DR: The results demonstrate that insurance markets may suffer from asymmetric information even absent a positive correlation between insurance coverage and risk occurrence, and suggest a general test for asymmetric Information.
Abstract: We demonstrate the existence of multiple dimensions of private information in the long-term care insurance market. Two types of people purchase insurance: individuals with private information that they are high risk and individuals with private information that they have strong taste for insurance. Ex post, the former are higher risk than insurance companies expect, while the latter are lower risk. In aggregate, those with more insurance are not higher risk. Our results demonstrate that insurance markets may suffer from asymmetric information even absent a positive correlation between insurance coverage and risk occurrence. The results also suggest a general test for asymmetric information.
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TL;DR: The authors decompose the attractiveness premium in an experimental labor market where "employers" determine wages of "workers" who perform a maze-solving task, and find a sizable beauty premium and identify three transmission channels: (a) physically attractive workers are more confident and higher confidence increases wages; (b) for a given level of confidence, physically attractive worker are (wrongly) considered more able by employers; (c) controlling for worker confidence, physical attractive workers have oral skills (such as communication and social skills) that raise their wages when they interact with employers.
Abstract: We decompose the beauty premium in an experimental labor market where "employers " determine wages of "workers " who perform a maze-solving task. This task requires a true skill which we show to be unaffected by physical attractiveness. We find a sizable beauty premium and can identify three transmission channels: (a) physically attractive workers are more confident and higher confidence increases wages; (b) for a given level of confidence, physically attractive workers are (wrongly) considered more able by employers; (c) controlling for worker confidence, physically attractive workers have oral skills (such as communication and social skills) that raise their wages when they interact with employers. Our methodology can be adopted to study the sources of discriminatory pay differentials in other settings.
TL;DR: In this paper, the authors consider the dynamic response of divorce rates to a policy shock and find that liberalized divorce laws caused a discernible rise in divorce rates for about a decade, but that this increase was substantially reversed over the next decade.
Abstract: Application of the Coase Theorem to marital bargaining suggests that shifting from a consent divorce regime to no-fault unilateral divorce laws should not affect divorce rates. Each iteration of the empirical literature examining the evolution of divorce rates across US states has yielded different conclusions about the effects of divorce law liberalization. I show that these results reflect a failure to jointly consider both the political endogeneity of these divorce laws and the dynamic response of divorce rates to a shock to the political regime. Taking explicit account of the dynamic response of divorce rates to the policy shock, I find that liberalized divorce laws caused a discernible rise in divorce rates for about a decade, but that this increase was substantially reversed over the next decade. That said, this increase explains very little of the rise in the divorce rate over the past half century. Both administrative data on the flow of new divorces, and measures of the stock of divorcees from the census support this conclusion. These results are suggestive of spouses bargaining within marriage, with an eye to their partner's divorce threat.
TL;DR: In this article, the authors show how prudence and temperance can be fully characterized by a preference relation over these lotteries, and they show that the direction of preference for a particular class of lottery pairs is equivalent to signing the nth derivative of the utility function.
Abstract: This paper examines preferences toward particular classes of lottery pairs. We show how such concepts as prudence and temperance can be fully characterized by a preference relation over these lotteries. If preferences are defined in an expected-utility framework with differentiable utility, the direction of preference for a particular class of lottery pairs is equivalent to signing the nth derivative of the utility function. What makes our characterization appealing is its simplicity, which seems particularly amenable to experimentation.
TL;DR: This article found that the relationship between current and lifetime earnings departs substantially from the textbook errors-in-variables model in ways that vary systematically over the life cycle, which can enable more appropriate analysis of, and correction for, errors in variance bias in any research that uses current earnings to proxy for lifetime earnings.
Abstract: Researchers in a variety of important economic literatures have assumed that current income variables as proxies for lifetime income variables follow the textbook errors-in-variables model. In our analysis of Social Security records containing nearly career-long earnings histories for the Health and Retirement Study sample, we find that the relationship between current and lifetime earnings departs substantially from the textbook model in ways that vary systematically over the life cycle. Our results can enable more appropriate analysis of, and correction for, errors-in-variables bias in any research that uses current earnings to proxy for lifetime earnings. (JEL D31, D91)
TL;DR: In this article, the authors proposed a directed cognition model to predict aggregate information acquisition patterns in two experiments, where information acquisition has an explicit financial cost and information acquisition is costly because time is scarce.
Abstract: The directed cognition model assumes that agents use partially myopic option-value calculations to select their next cognitive operation. The current paper tests this model by studying information acquisition in two experiments. In the first experiment, information acquisition has an explicit financial cost. In the second experiment, information acquisition is costly because time is scarce. The directed cognition model successfully predicts aggregate information acquisition patterns in these experiments. When the directed cognition model and the fully rational model make demonstrably different predictions, the directed cognition model better matches the laboratory evidence. (JEL D83)
TL;DR: The authors show that the joint behavior of stock prices and TFP favors a view of business cycles driven largely by a shock that does not affect productivity in the short run, but affects productivity with substantial delay, and therefore does not look like a monetary shock.
Abstract: We show that the joint behavior of stock prices and TFP favors a view of business cycles driven largely by a shock that does not affect productivity in the short run ? and therefore does not look like a standard technology shock ? but affects productivity with substantial delay ? and therefore does not look like a monetary shock. One structural interpretation for this shock is that it represents news about future technological opportunities which is first captured in stock prices. This shock causes a boom in consumption, investment, and hours worked that precedes productivity growth by a few years, and explains about 50 percent of business cycle fluctuations. (JEL G12, E32, E44)
TL;DR: This paper explored the role of the caste system in shaping career choices by gender in Bombay using new survey data on school enrollment and income over the past 20 years and found that male working-class-lower-caste networks continue to channel boys into local language schools that lead to the traditional occupation, despite the fact that returns to nontraditional white-collar occupations rose substantially in the 1990s, suggesting the possibility of a dynamic inefficiency.
Abstract: This paper addresses the question of how traditional institutions interact with the forces of globalization to shape the economic mobility and welfare of particular groups of individuals in the new economy. We explore the role of one such traditional institution-the caste system-in shaping career choices by gender in Bombay using new survey data on school enrollment and income over the past 20 years. We find that male working-class-lower-caste-networks continue to channel boys into local language schools that lead to the traditional occupation, despite the fact that returns to nontraditional white-collar occupations rose substantially in the 1990s, suggesting the possibility of a dynamic inefficiency. In contrast, lower-caste girls, who historically had low labor market participation rates and so did not benefit from the network, are taking full advantage of the opportunities that became available in the new economy by switching rapidly to English schools.
TL;DR: Data from a randomized social experiment in Mexico is used to estimate and validate a dynamic behavioral model of parental decisions about fertility and child schooling, and an alternative subsidy schedule is revealed that would induce a greater impact on average school attainment at similar cost to the existing program.
Abstract: This paper uses data from a randomized social experiment in Mexico to estimate and validate a dynamic behavioral model of parental decisions about fertility and child schooling, to evaluate the effects of the PROGRESA school subsidy program, and to perform a variety of counterfactual experiments of policy alternatives. Our method of validation estimates the model without using post-program data and then compares the model’s predictions about program impacts to the experimental impact estimates. The results show that the model’s predicted program impacts track the experimental results. Our analysis of counterfactual policies reveals an alternative subsidy schedule that would induce a greater impact on average school attainment at similar cost to the existing program.
TL;DR: In this paper, the authors estimate the change in consumption expenditures caused by the 2001 federal income tax rebates and test the permanent income hypothesis using questions expressly added to the Consumer Expenditure Survey.
Abstract: Using questions expressly added to the Consumer Expenditure Survey, we estimate the change in consumption expenditures caused by the 2001 federal income tax rebates and test the permanent income hypothesis. We exploit the unique, randomized timing of rebate receipt across households. Households spent 20 to 40 percent of their rebates on nondurable goods during the three-month period in which their rebates arrived, and roughly two-thirds of their rebates cumulatively during this period and the subsequent three-month period. The implied effects on aggregate consumption demand are substantial. Consistent with liquidity constraints, responses are larger for households with low liquid wealth or low income.
TL;DR: In this paper, the authors summarize the main findings and perspectives emerging from a collective research project on the dynamics of income and wealth distribution, and construct a high-quality, long- run, international database on income, wealth concentration, using historical tax statistics.
Abstract: This paper summarizes the main findings and perspectives emerging from a collective research project on the dynamics of income and wealth distribution. The primary objective of this project is to construct a high-quality, long- run, international database on income and wealth concentration, using historical tax statistics. The resulting database now includes annual series covering most of the twentieth century for a number of (mostly Western) countries.
TL;DR: In this paper, the effects of increases in incarceration length on employment and earnings prospects of individuals after their release from prison were investigated using a variety of research designs including controlling for observable factors and using instrumental variables for incarceration length.
Abstract: This paper estimates effects of increases in incarceration length on employment and earnings prospects of individuals after their release from prison. I utilize a variety of research designs including controlling for observable factors and using instrumental variables for incarceration length based on randomly assigned judges with different sentencing propensities. The results show no consistent evidence of adverse labor market consequences of longer incarceration length using any of the analytical methods in either the state system in Florida or the federal system in California.
TL;DR: The medium-term cycle as discussed by the authors is defined as the sum of the high-and medium-frequency variation in the data, and then show that these kinds of fluctuations are substantially more volatile and persistent than are the conventional measures.
Abstract: Over the postwar period, many industrialized countries have experienced significant medium-frequency oscillations between periods of robust growth versus relative stagnation. Conventional business cycle filters, however, tend to sweep these oscillations into the trend. In this paper we explore whether they may, instead, reflect a persistent response of economic activity to the high-frequency fluctuations normally associated with the cycle. We define as the medium-term cycle the sum of the high-and medium-frequency variation in the data, and then show that these kinds of fluctuations are substantially more volatile and persistent than are the conventional measures. These fluctuations, further, feature significant procyclical movements in both embodied and disembodied technological change, and research and development (R&D), as well as the efficiency and intensity of resource utilization. We then develop a model of medium-term business cycles. A virtue of the framework is that, in addition to offering a unified approach to explaining the high- and medium-frequency variation in the data, it fully endogenizes the movements in productivity that appear central to the persistence ofthese fluctuations. For comparison, we also explore how well an exogenous productivity model can explain the facts.
Abstract: We define a country’s technology as a triple of efficiencies: one for unskilled labour, one for skilled labour and one for capital. We find a negative crosscountry correlation between the efficiency of unskilled labour, and the efficiencies of skilled labour and capital. We interpret this finding as evidence of the existence of a World Technology Frontier. On this frontier, increases in the efficiency of unskilled labour are obtained at the cost of declines in the efficiency of skilled labour and capital. We estimate a model in which firms in each country optimally choose from a menu of technologies, i.e. they choose their technology subject to a Technology Frontier. The optimal choice of technology depends on the country’s endowment of skilled and unskilled labour, so that the model is one of appropriate technology. The estimation allows for country-specific technology frontiers, due to barriers to technology adoption. We find that poor countries tend disproportionately to be inside the World Technology Frontier.
TL;DR: In this paper, the determinants of terrorism at the country level were investigated and it was shown that countries in some intermediate range of political freedom are more prone to terrorism than countries with high levels of politicalfreedom or countries with highly authoritarian regimes.
Abstract: This article provides an empirical investigation of the determinants of terrorism at the country level. In contrast with the previous literature on this subject, which focuses on transnational terrorism only, I use a new measure of terrorism that encompasses both domestic and transnational terrorism. In line with the results of some recent studies, this article shows that terrorist risk is not significantly higher for poorer countries, once the effects of other country-specific characteristics such as the level of political freedom are taken into account. Political freedom is shown to explain terrorism, but it does so in a non-monotonic way: countries in some intermediate range of political freedom are shown to be more prone to terrorism than countries with high levels of political freedom or countries with highly authoritarian regimes. This result suggests that, as experienced recently in Iraq and previously in Spain and Russia, transitions from an authoritarian regime to a democracy may be accompanied by temporary increases in terrorism. Finally, the results suggest that geographic factors are important to sustain terrorist activities.
TL;DR: In this paper, the authors investigate whether the social aspect of organizations has an important benefit, fostering unselfish cooperation and norm enforcement within the group, but also whether there is a dark side, in the form of hostility between groups.
Abstract: Due to incomplete contracts, efficiency of an organization depends on willingness of individuals to take non-selfish actions, such as cooperating when there is no incentive to do so or punishing inefficient actions by others. Organizations also constitute a social boundary, or group. We investigate whether this social aspect of organizations has an important benefit— fostering unselfish cooperation and norm enforcement within the group—but also whether there is a dark side, in the form of hostility between groups. Our experiment provides the first evidence free from the confounding effect of self-selection into groups. Individuals are randomly assigned to different platoons during a four-week period of officer training in the Swiss Army. We conduct choice experiments—simultaneous prisoner’s dilemma games, with and without third-party punishment—in week three. Random assignment significantly increases willingness to cooperate with fellow platoon members. Assignment does not lead to hostility, in the sense of vindictive punishment of outsiders, but does affect norm enforcement, enhancing willingness to enforce a norm of cooperation towards fellow platoon members. This suggests that the social aspect of organizations motivates efficient behavior even when ordinary incentives fail and helps to explain practices designed to foster social ties or group identification within an organization. (This abstract was borrowed from another version of this item.)
TL;DR: A significant negative effect of economic conditions early in life on individual mortality rates at all ages is indicated.
Abstract: This paper analyzes the effect of economic conditions early in life on the individual mortality rate later in life, using business cycle conditions early in life as an exogenous indicator. We have individual data records from Dutch registers of birth, marriage, and death certificates, covering an observation window of unprecedented size (1812-2000). These are merged with historical data on macro-economic and health indicators. We correct for secular changes over time and other mortality determinants. We nonparametrically compare those born in a recession to those born in the preceding boom, and we estimate duration models where the individual’s mortality rate depends on current conditions, conditions early in life, age, individual characteristics, including individual socio-economic indicators, and interaction terms. The results indicate a significant negative effect of economic conditions early in life on individual mortality rates at all ages.