Showing papers on "Natural experiment published in 2005"

The Effect of Information on Voter Turnout: Evidence from a Natural Experiment

Abstract: Do better-informed people vote more? Recent formal theories of voter turnout emphasize a positive effect of being informed on the propensity to vote, but the possibility of endogenous information acquisition makes estimation of causal effects difficult. I estimate the causal effects of being informed on voter turnout using unique data from a natural experiment Copenhagen referendum on decentralization. Four of fifteen districts carried out a pilot project, exogenously making pilot city district voters more informed about the effects of decentralization. Empirical estimates based on survey data confirm a sizeable and statistically significant causal effect of being informed on the propensity to vote.

Effects of Employment Protection on Worker and Job Flows: Evidence from the 1990 Italian Reform

Abstract: This paper uses the Italian Social Security employer-employee panel to study the effects of the Italian reform of 1990 on worker and job flows We exploit the fact that this reform increased unjust dismissal costs for firms below 15 employees, while leaving dismissal costs unchanged for bigger firms, to set up a natural experiment research design We find that the increase in dismissal costs decreased accessions and separations for workers in small relative to big firms, especially in sectors with higher employment volatility Moreover, we find that the reform reduced firms' employment adjustments on the internal margin as well as entry rates while increasing exit rates

Vertical Antitrust Policy as a Problem of Inference

Abstract: The legality of nonprice vertical practices in the U.S. is determined by their likely competitive effects. An optimal enforcement rule combines evidence with theory to update prior beliefs, and specifies a decision that minimizes the expected loss. Because the welfare effects of vertical practices are theoretically ambiguous, optimal decisions depend heavily on prior beliefs, which should be guided by empirical evidence. Empirically, vertical restraints appear to reduce price and/or increase output. Thus, absent a good natural experiment to evaluate a particular restraint's effect, an optimal policy places a heavy burden on plaintiffs to show that a restraint is anticompetitive.

A Natural Experiment in Monetary Policy Covering Three Episodes of Growth and Decline in the Economy and the Stock Market

Abstract: The third of three episodes in a major natural experiment in monetary policy that started more than 80 years ago is just now coming to an end. The experiment consists in observing the effect on the economy and the stock market of the monetary policies followed during and after three very similar periods of rapid economic growth in response to rapid technological change: the booms of the 1920s in the United States, the 1980s in Japan and the 1990s in the United States. In this experiment, the quantity of money is the counterpart of the experimenter's input. The performance of the economy and the level of the stock market are the counterpart of the experimenter's output. The results of this natural experiment are clear, at least for major ups and downs: what happens to the quantity of money has a determinative effect on what happens to national income and to stock prices. The results strongly support Anna Schwartz's and my 1963 conjecture about the role of monetary policy in the Great Contraction. They also support the view that monetary policy deserves much credit for the mildness of the recession that followed the collapse of the U.S. boom in late 2000.

The Effect of the One-Child Policy on Fertility in China: Identification Based on the Differences-in-Differences

Abstract: This paper measures the effect of China's one-child policy on fertility by exploring the natural experiment that has been created by China's unique affirmative birth control policy, which is possibly the largest social experiment in human history. Because the one-child policy only applied to Han Chinese, but not to ethnic minorities, we construct a differences-in-differences estimator to identify the effect of the policy on fertility. Such a natural experiment is a rare opportunity, whether for the analysis of the effect on fertility or for the analysis of economics in general. Using two rounds of the Chinese Population Census, we find that the one-child policy has had a large effect on fertility. The average effect on the post-treatment cohorts on the probability of having a second child is as large as -11 percentage points. We also find that the magnitude is larger in urban areas and for more educated women. Our robustness tests suggest that our differences-in-differences estimates of the effect of the one-child policy are not very likely to be driven by other policy or socio-economic changes that have affected the Han and the minorities differently.

A ‘Natural Experiment’ Approach to Contingent Valuation of Private and Public UV Health Risk Reduction Strategies in Low and High Risk Countries

Abstract: We present the results of a ‘natural experiment’ to test how variations in exogenous risk levels affect resultant willingness to pay (WTP) for risk reduction. The case study presented considers WTP for reductions in the skin cancer risks associated with exposure to solar UV radiation. A common design contingent valuation survey is conducted in four countries, across which variation in geographical latitude and genetic mix mean that exogenous risks differ substantially. Survey respondents were presented with both a private and public good route for affecting risk reduction. In both cases, results confirm that once adjustment had been made for expected relationships with other covariates (such as income and risk averting behaviour), valuation responses for both goods conformed to expectations with the ordering of values across countries reflecting the ordering of scientifically established health risks. This suggests that links between values and objective health risks may be observed within such situations and provides a justification for continuing research into more natural representations of risk and risk reductions in order to yield consistent and robust measures of associated values.

Vive la Revolution! Long Term Returns of 1968 to the Angry Students

Abstract: The famous events of May 1968, starting with student riots, threw France into a state of turmoil. The period of 'revolution' coincided with the time in which important examinations are undertaken. As a result, normal examination procedures were abandoned and the pass-rate for various qualifications increased enormously in that one year. These events were particularly important for students at an early (and highly selective) phase of higher education. They are shown to have pursued further years of education because thresholds were lowered at critical stages (i.e., at entry to university and in the early years of university). These historic events provide a natural experiment to analyze the returns to years of higher education for the affected generation and to consider consequences for their children. Thus, we can contribute to the debate on two very controversial questions in the economics of education: What is the true causal relationship between educational attainment and its labor market value? Is there a causal relationship between the education of parents and that of their children? Much of the existing literature considers the effect of interventions altering an individual's years of compulsory schooling on the margin rather than an intervention which occurs at a later stage. Our results are based on the latter and show a higher return for an additional year of education than would be suggested by many of the former studies. This may reflect higher returns from an additional year of university education rather than an additional year of compulsory education. Furthermore, the treatment group considered here is on the margin of the higher education system. This study suggests that expanding the university system to accommodate such people can yield very high private returns. There is also evidence of a strong causal relationship between obtaining an additional year of higher education and the educational outcomes of children. Hence, our study suggests very positive effects of the '1968 events' for affected cohorts and is of contemporary relevance given the current debate in many countries about widening access to higher education.

Effects of Employment Protection on Worker and Job Flows: Evidence from the 1990 Italian Reform

Abstract: This paper uses the Italian Social Security employer-employee panel to study the effects of the Italian reform of 1990 on worker and job flows. We exploit the fact that this reform increased unjust dismissal costs for firms below 15 employees, while leaving dismissal costs unchanged for bigger firms, to set up a natural experiment research design. We find that the increase in dismissal costs decreased accessions and separations for workers in small relative to big firms, especially in sectors with higher employment volatility. Moreover, we find that the reform reduced firms' employment adjustments on the internal margin as well as entry rates while increasing exit rates.

Causal effects of subsidized career breaks

Abstract: The paper uses a quasi-experimental situation to analyze the effects of career interruptions on future labor market outcomes. Data are generated by a Swedish program that granted career breaks to applicants until funds where exhausted. Comparing approved and declined (due to lack of funds) applications allows us to derive “pure” effects of interrupted career that are not confounded by selection or omitted variables. The results show no significant effects on working hours but give some support for increased retirement probabilities among the oldest workers. The average wage effect is negative and in the order of 3 percent 1–2 years after the break. Further evidence suggests that one reason for the large negative wage effects may be related to changes in jobs and tasks. Keywords: Career interruptions, labor supply, wages, natural experiment JEL Codes: J31, J22, J24, J26

How Changes in Benefits Entitlement Affect the Duration of Unemployment

Abstract: This paper investigates the disincentive effects of the potential duration of unemployment insurance (UI) benefits. The disincentive effects are identified by exploiting changes in the UI system in Slovenia, which involved substantial reductions in the potential benefit duration and had characteristics of a natural experiment. We find that the change had a positive effect on the exit rate out of unemployment - both to employment and to other destinations - at various durations of unemployment spells and for many categories of unemployed workers.

Understanding population health: lessons from the former Soviet Union

Abstract: The collapse of the Soviet Union was a massive natural experiment that has provided many insights that help our understanding of the determinants of population health. This paper identifies a series of lessons learnt from this experience: (1) Rapid transition can damage health. (2) When undertaking comparative research, it is essential to have a common understanding of what different terms mean in different places. (3) When looking at exposures and outcomes, it is important to appreciate that the delay between exposure to a risk factor and the appearance of disease can range from almost none to several decades. (4) Contrary to the views of some commentators, modern healthcare has made a substantial contribution to the health of populations in industrialised countries. (5) Science can flourish only where it is free from ideology. (6) Public health and basic science achieve most when they work together. (7) Without functioning democracy, the outlook for better health is poor.

Vive la Révolution! Long term returns of 1968 to the angry students

Abstract: The famous events of May 1968, starting with student riots, threw France into a state of turmoil. The period of ‘revolution’ coincided with the time in which important examinations are undertaken. Normal procedures were abandoned and the pass-rate for various qualifications increased enormously. These events were particularly important for students at an early (and highly selective) phase of higher education. They are shown to have pursued further years of education because thresholds were lowered at critical stages. These historic events provide a natural experiment to analyse the returns to years of higher education for the affected generation and to consider consequences for their children. Thus, we contribute to debate on two very controversial questions: What is the true causal relationship between educational attainment and its labour market value? Is there a causal relationship between the education of parents and that of their children? Unlike most of the literature, we consider the effect of an intervention which alters an individual’s years of higher education rather than compulsory schooling. The results show a relatively high return, which might indicate that private returns are higher for the former. Furthermore, the treatment group is on the margin of the higher education system. This study suggests that expanding the university system to accommodate such people can yield very high private returns. Hence our study suggests very positive effects of the ‘1968 events’ for affected cohorts and is of contemporary relevance given the current debate in many countries about widening access to higher education.

Education and intergenerational mobility: evidence from a natural experiment in Puerto Rico

Abstract: The existence of intergenerational spillovers to public investments in schooling is often assumed in policy discussions regarding economic development. However, few studies to date have forwarded convincing evidence that externalities exist for developing countries. In this paper, we address this issue using the arguably exogenous schooling consequences of a major hurricane strike on Puerto Rico in the 1950s. Using data from the U.S. Census of Population for Puerto Rico, we first find that individuals on the margin of school entry at the time of the storm and residing in the most exposed regions of the island had significantly lower levels of education as adults than their counterparts in less exposed regions. Using the interaction of wind speed and age at the time of the storm as an instrument, we then find that maternal education is related to the probability that a child speaks English. Our estimates imply an additional year of education raises the probability that a child speaks English by between 4.3 and 4.5 percentage points, or approximately 24 to 28 percent. We find no conclusive evidence that parental education increases the probability that a child is enrolled, literate, or in an age-appropriate grade. On balance, these findings suggest that education is responsible at least in part for the persistence of human capital across generations.

Are business cycles all alike in europe

Abstract: We investigate whether business cycles are all alike computing the welfare costs of business cycles for European-Union (EU) as the solution of the problem proposed by Lucas (1987). Because these countries have a long tradition of integration and trade, it is a "natural experiment" to investigate how similar their welfare costs of business cycles are. Using standard assumptions on preferences and a reasonable reduced form for consumption, we computed welfare costs using three alternative trend-cycle decomposition methods, but focusing on the multivariate Beveridge-Nelson decomposition. Our results show that welfare costs are very different across EU countries and between US and EU countries, and thus it is a strong evidence that business cycles are not alike in Europe.

Does Oil Corrupt? Theory and Evidence from a Natural Experiment in West Africa

Abstract: This paper presents a general framework and an original dataset/experiment to assess the role of natural resources in determining corruption. We argue that the impact of an oil discovery on corruption should be analyzed in the context of a repeated game where an endogenous elite interacts with the population - the first determines the level of corruption, and the second may react by starting insurrections. We show that only in the “bad” equilibrium pattern of this game, characterized by high corruption and social unrest, does an anticipated positive shock on the corruption technology immediately increase corruption (as the elite wants to augment the likelihood of being in power when the shock occurs). We take this proposition to the data by analyzing the impact of the oil discovery announcements that took place in the period 1997-99 in Sao Tome and Principe (West Africa). For this purpose we designed and conducted a household survey on perceived corruption in the public services/sector of the country (including 841 faceto-face interviews) — the survey instrument was retrospective and used personal histories to elicit memories from the respondents. We use difference-in-differences regressions to draw results for the various questions on perceived corruption. Urban subjects, public officials, and respondents with higher reported experience with the services/issues at stake are used as treatment groups (i.e. more able to recognize any change). In addition, the regressions control for well-known pessimism bias: this is done by using data from direct questions on optimism and from the inclusion of a “placebo” period (where no major occurrence had arisen). We conclude that a clear increase in perceived corruption has occurred in Sao Tome and Principe in recent years with special incidence in health care, education, police, customs, state jobs, and vote buying.

"The War for the Fare": How Driver Compensation Affects Bus System Performance

Abstract: Two systems of bus driver compensation exist in Santiago, Chile. Most drivers are paid per passenger transported, while a second system compensates other drivers with a fixed wage. Compared with fixed-wage drivers, per-passenger drivers have incentives to engage in "La Guerra por el Boleto" ("The War for the Fare"), in which drivers change their driving patterns to compete for passengers. This paper takes advantage of a natural experiment provided by the coexistence of these two compensation schemes on similar routes in the same city. Using data on intervals between bus arrivals, we find that the fixed-wage contract leads to more bunching of buses, and hence longer average passenger wait times. The per-passenger drivers are assisted by a group of independent information intermediaries called "sapos" who earn their living by standing at bus stops, recording arrival times, and selling the information to subsequent drivers who drive past. We find that a typical bus passenger in Santiago waits roughly 10% longer for a bus on a fixed-wage route relative to an incentive-contract route. However, the incentives also lead drivers to drive noticeably more aggressively, causing approximately 67% more accidents per kilometer driven. Our results have implications for the design of incentives in public transportation systems.

Impaired Bank Health and Default Risk

Abstract: Empirical studies in corporate finance have long been interested in the role of banks in reducing the costs of financial distress. The purpose of this paper is to investigate how various measures of bank health and how defaults of major trading partners affected the probability of bankruptcy among medium-size firms in Japan. Using probit models, we examine the causes of bankruptcy for unlisted Japanese companies in the late 1990s and early 2000s. The environment and events in Japan provide a "natural experiment" that allows the empirical test. We find that several measures on bank-specific financial health have significant impacts on a borrower's probability of bankruptcy, even when observable characteristics relating to these borrower's financial variables are controlled for. In particular, a close bank-firm relationship--which usually reduces the probability of bankruptcy--exacerbates the impacts of a financial crisis, which substantially damages other bank health measures as well.

Does Privatization Deliver? Access to Telephone Services and Household Income in Poor Rural Areas Using a Quasi-Natural Experiment in Peru

Abstract: This paper takes advantage of a quasi-natural experiment in Peru by which the privatized telecommunications company was required by government to randomly install and operate public pay phones in small rural towns throughout the national territory. Using a specially designed household survey for a representative sample of rural towns, it is possible to link access to telephone services with household income. It was found that, regardless of the income measurement, most characteristics of public telephone usage are positively linked with income. Remarkably, the benefits occur at both non-farm and farm income levels. Not only do the findings hold when using instrumental variables, but they are also further confirmed when using propensity scores matching methods.

The Wealth Tax and Entrepreneurial Activity

Abstract: Entrepreneurship is often credited with generating important positive economic externalities. For example, entrepreneurs are often credited for promoting innovation, discovering new markets, and serving as a mechanism for knowledge spillover. Governments increasingly view encouraging entrepreneurship as an important policy objective. Economists have long studied the determinants of entrepreneurship. Taxation has also been found to be important, in particular income taxes and capital taxes. One form of taxation that has not been considered so far, however, is the wealth tax. The wealth tax is likely to influence entrepreneurship negatively, by affecting the pool of capital available to start up businesses as well as reducing the net return to successful entrepreneurship. This paper illustrates the impact of a tax on wealth on entrepreneurship using a simple model of the choice between becoming an entrepreneur or an employee. Actual data is then used to crudely investigate whether the wealth tax indeed has a measurable effect on self-employment in OECD countries, using increasingly sophisticated techniques. A difference-in-difference type estimator using the abolishment of the wealth tax as a ”natural experiment” points to a consistent pattern of a perceptible, but small impact.

The Effect of a Change in Legislation on the Wage Gap in Brazil

Abstract: This article investigates gender wage discrimination based on a natural experiment, namely, the introduction of compulsory open exams applied in Brazil to public service job candidates as a way to prevent clientelism and nepotism. Our hypothesis is that if there is discrimination, so we should observe gender wage gap reduction after the introduction of the open exams. We find evidence in favor of this hypothesis, thus suggesting that there is discrimination against women.

Does Privatization Deliver? Access to Telephone Services and Household Income in Poor Rural Areas Using a Quasi-Natural Experiment for Peru

Abstract: This paper takes advantage of a quasi-natural experiment in Peru by which the privatized telecommunications company was required by government to randomly install and operate public pay phones in small rural towns throughout the national territory. Using a specially designed household survey for a representative sample of rural towns, it is possible to link access to telephone services with household income. It was found that, regardless of the income measurement, most characteristics of public telephone usage are positively linked with income. Remarkably, the benefits occur at both non-farm and farm income levels. Not only do the findings hold when using instrumental variables, but they are also further confirmed when using propensity scores matching methods.

Informal sanctions and conditional cooperation: A natural experiment on voluntary contributions to a public good

Abstract: In a natural experiment, this paper studies the impact of an informal sanctioning mechanism on individuals' voluntary contribution to a public good. Cross-country skiers' actual cash contributions in two ski resorts, one with and one without an informal sanctioning system, are used. I find the contributing share to be higher in the informal sanctioning system (79 percent) than in the non-sanctioning system (36 percent). Previous studies in one-shot public good situations have found an increasing conditional contribution (CC) function, i.e. the relationship between expected average contributions of other group members and the individual's own contribution. In contrast, the present results suggest that the CC-function in the non-sanctioning system is non-increasing at high perceived levels of others' contribution. This relationship deserves further testing in lab.

Get Paid Now or Get Paid Later: What Are Sailors Deciding

Abstract: : This paper is the about choices that enlisted Sailors have made when offered an early lump-sum payment in return for smaller retirement payments in the future. In short, we describe a natural experiment on the tradeoffs Sailors have made between current and future dollars. While many economists have conducted classroom experiments on these tradeoffs, there are few real-world examples in which thousands of people faced such choices and the choices have been made overseveral years.

Learning by Bidding: Evidence from a Large-Scale Natural Experiment

Abstract: Learning is a subject of intense research in experimental economics. We contribute to this debate by presenting persuasive evidence that learning took place among uninformed heterogeneous agents on a quasi-stock market during a large-scale natural experiment that by size, incentives, and variation belongs among the largest experiments ever conducted. To detect and quantify learning we develop new measures of individual performance during the bidding process when prices of goods vary over succeeding stages of bidding.

Does Privatization Deliver?: Access to Telephone Services and Household Income in Poor Rural Areas Using a Quasi-Natural Experiment in Peru

Abstract: This paper takes advantage of a quasi-natural experiment in Peru by which the privatized telecommunications company was required by government to randomly install and operate public pay phones in small rural towns throughout the national territory. Using a specially designed household survey for a representative sample of rural towns, it is possible to link access to telephone services with household income. It was found that, regardless of the income measurement, most characteristics of public telephone usage are positively linked with income. Remarkably, the benefits occur at both non-farm and farm income levels. Not only do the findings hold when using instrumental variables, but they are also further confirmed when using propensity scores matching methods.

The Value of Investor Protection: Firm Evidence from Cross-Border Mergers

Abstract: International law prescribes that in a cross-border merger where the acquiror buys 100 percent of the target, the target firm becomes a national of the country of the acquiror. Among other effects, the change in nationality implies a change in investor protection, because the law that is applicable to the newly merged firm changes as well. Therefore, cross-border mergers provide a natural experiment to analyze the effects of changes - both improvements and deteriorations - in corporate governance on firm value. We construct measures of the change in investor protection induced by cross-border mergers in a sample of 506 acquisitions from 39 countries, spanning the period 1989 to 2002. We find that the announcement effect of a cross-border merger for the target firm is higher - relative to a matching, domestic acquisition - the better the shareholder protection and the accounting standards in the country of origin of the acquiror. This result is only significant in acquisitions where the acquiror buys 100 percent of the target, and therefore where the nationality of the target firm changes. In addition, this result is only significant when the acquiror comes from a more-protective country, which suggests that target firms avoid addopting weaker protection via private contracting. Interestingly, we do not find a symmetric effect on the acquiror's return. All in all, we present evidence that the transfer of better corporate governance practices through cross-border mergers is positively valued by markets with weaker corporate governance.

You never had it so good the parallel importing of DVD's

Abstract: For a brief period from 1998 to 2001, the parallel importing of DVDs was permitted in New Zealand. Matt Burgess and Lewis Evans saw this natural experiment' as a opportunity to examine the benefits and costs of parallel importing. And their conclusion is that the parallel importation of DVDs enhanced the welfare of consumers.

Determinants of Recent Immigrants’ Location Choices: Quasi-Experimental Evidence

Abstract: This paper exploits a Danish spatial dispersal policy on refugees which can be regarded a natural experiment to investigate the influence of regional factors on recent immigrants’ location choices. The main push factors are lack of co-ethnics and presence of immigrants. Additional push factors are lack of access to jobs, education and housing which explain why recent immigrants are attracted to large cities. Finally, placed refugees are sensitive to regional unemployment and some evidence of welfare seeking is presented as well.