Most recent papers:

• Asymmetries In The Responses Of Regional Job Flows To Oil Price Shocks.
  Mohamad B. Karaki.
  Economic Inquiry. October 19, 2017
  This paper studies the effect of oil price innovations on manufacturing job flows across U.S. states. First, I estimate a nonlinear structural equation model and compute impulse response functions by Monte Carlo integration. I find asymmetries in the responses of job flows to positive and negative oil price innovations. Yet, these asymmetries do not pass a test of symmetry on the impulse responses, especially after accounting for data mining. Third, I use a test for the absence of job reallocation to evaluate whether an unexpected increase in the real price of oil price triggers an important change in job reallocation. I find that oil price shocks have limited regional allocative effects. (JEL E24, E32, Q43)

  October 19, 2017   doi: 10.1111/ecin.12502   open full text
• To Deter Or To Moderate? Alliance Formation In Contests With Incomplete Information.
  Kai A. Konrad, Florian Morath.
  Economic Inquiry. October 19, 2017
  We consider two players' choice about the formation of an alliance ahead of conflict in a framework with incomplete information about the strength of the potential ally. When deciding on alliance formation, players anticipate the self‐selection of other players and the informational value of own and other players' choices. In the absence of these signaling effects, strong players have an incentive to stand alone, which leads to a separating equilibrium. This separating equilibrium can be destabilized by deception incentives if beliefs are updated on the basis of endogenous alliance formation choices. Weak players may find it attractive to appear strong in order to deter competitors from positive effort choices. Strong players may find it attractive to appear weak in order to give their competitors a false sense of security and then beat them with little effort. Moreover, appearing weak allows players to free‐ride when alliances are formed. (JEL D72, D74)

  October 19, 2017   doi: 10.1111/ecin.12503   open full text
• Property Rights And Loss Aversion In Contests.
  Subhasish M. Chowdhury, Joo Young Jeon, Abhijit Ramalingam.
  Economic Inquiry. October 17, 2017
  We analyze the effects of property rights and the resulting loss aversion on contest outcomes. We study three situations: in “gain” two players start with no prize and make sunk bids to win a prize; in “loss” both the players start with prizes and whoever loses the contest loses their prize; and in “mixed” only one player starts with a prize that stays with him if he wins, but is transferred to the rival otherwise. Since the differences among the treatments arise only from framing, the expected utility and the standard loss aversion models predict no difference in bids across treatments. We introduce a loss aversion model in which the property rights are made salient, and as a result the reference point varies across treatments. This model predicts average bids in descending order in the loss, the mixed, and the gain treatment; and higher bids by the player with property rights in the mixed treatment. The results from a laboratory experiment broadly support these predictions. There is no significant difference in bids in the loss (gain) treatment and bids by property rights holder (nonholder) in the mixed treatment. A model incorporating both loss aversion and social preferences explains this result. (JEL C91, C72, D23, D74)

  October 17, 2017   doi: 10.1111/ecin.12505   open full text
• Dynamic Treatment Effects Of Teacher's Aides In An Experiment With Multiple Randomizations.
  Jeffrey Penney.
  Economic Inquiry. October 16, 2017
  Using data from a large‐scale two‐stage experiment wherein students and teachers were randomized at both kindergarten entry and first grade to be sorted into classes either with or without full‐time teacher's aides, I estimate an econometric model that is uniquely suited to take advantage of this design to determine their effect on academic achievement. The identification strategy produces fully nonparametric dynamic average treatment effects for every treatment path. I find that the use of full‐time teacher's aides increases student achievement, but the benefits appear to accrue mostly to those of higher socioeconomic status and to White students. A cost‐benefit analysis shows that full‐time teacher's aides may be a competitive alternative to class size reductions in terms of net social benefits. (JEL I21, I28)

  October 16, 2017   doi: 10.1111/ecin.12511   open full text
• Monetary Policy And Anti‐Cyclical Bank Capital Regulation.
  Roger Aliaga‐Díaz, María Pía Olivero, Andrew Powell.
  Economic Inquiry. October 13, 2017
  The financial crisis of 2008–2009 revived attention given to booms and busts in bank credit, and their effects on real activity. This interest sparked two different strands of research in macro. The first one focuses on monetary policy in the context of financial frictions. The second studies capital regulation in banking. To the best of our knowledge, so far these two topics have mostly been studied in isolation from each other. Thus, we still lack an understanding of how monetary policy and bank capital regulation interact in the presence of financial fragility. This paper aims to contribute to furthering this understanding. Specifically, we ask how the monetary policy rule should look like in the presence of cyclical capital requirements. We extend the dynamic stochastic general equilibrium model with bank capital in Aliaga‐Díaz and Olivero by introducing price rigidities in the spirit of the New‐Keynesian literature. We find that: First, anti‐cyclical requirements have important stabilization properties relative to the case of constant requirements. This is true for all types of fluctuations that we study, which include those caused by productivity, preference, fiscal, monetary, and financial shocks. Second, output and consumption volatilities present in the no regulation economy can be recovered with anti‐cyclical requirements as long as the policy rate responds only slightly to credit spreads. Third, monetary policy rules that respond to credit conditions also perform better in terms of welfare. (JEL E32, E44)

  October 13, 2017   doi: 10.1111/ecin.12501   open full text
• Integrated Household Surveys: An Assessment Of U.S. Methods And An Innovation.
  Krislert Samphantharak, Scott Schuh, Robert M. Townsend.
  Economic Inquiry. October 12, 2017
  We present a vision for improving household financial surveys by integrating responses from questionnaires more completely with financial statements and combining them with payments data from diaries. Integrated household financial accounts—balance sheet, income statement, and statement of cash flows—are used to assess the degree of integration in leading U.S. household surveys, focusing on inconsistencies in measures of the change in cash. Diaries of consumer payment choice can improve dynamic integration. Using payments data, we construct a statement of liquidity flows: a detailed analysis of currency, checking accounts, prepaid cards, credit cards, and other payment instruments, consistent with conventional cash flow measures and the other financial accounts. (JEL D12, D14, E41, E42)

  October 12, 2017   doi: 10.1111/ecin.12489   open full text
• Forecasting With Social Media: Evidence From Tweets On Soccer Matches.
  Alasdair Brown, Dooruj Rambaccussing, J. James Reade, Giambattista Rossi.
  Economic Inquiry. October 12, 2017
  Social media is now used as a forecasting tool by a variety of firms and agencies. But how useful are such data in forecasting outcomes? Can social media add any information to that produced by a prediction/betting market? We source 13.8 million posts from Twitter, and combine them with contemporaneous Betfair betting prices, to forecast the outcomes of English Premier League soccer matches as they unfold. Using a microblogging dictionary to analyze the content of Tweets, we find that the aggregate tone of Tweets contains significant information not in betting prices, particularly in the immediate aftermath of goals and red cards. (JEL G14, G17)

  October 12, 2017   doi: 10.1111/ecin.12506   open full text
• New Facts About Firm Risk Across Countries And Over The Business Cycle.
  Hernan Moscoso Boedo.
  Economic Inquiry. September 22, 2017
  The characteristics of firm‐level risk over the cycle and across countries are studied in this paper. Low idiosyncratic firm‐level risk is found to be a feature of highly developed, stable economies, whereas the countercyclicality of firm‐level risk is associated with flexible as well as stable economies. These facts are uncovered with the help of a theoretical model where small, risk‐averse firms display procyclical risk, whereas larger, risk‐neutral firms have countercyclical risk patterns that depend on the rigidity of the business environment. The predictions of the model are then confirmed by the data using a large international firm‐level database (ORBIS) together with the World Bank Doing Business Database, during the “Great Recession” across 55 countries. The findings are critical for the growing literature of uncertainty driven business cycles, and show that firm‐level uncertainty cannot be treated as an exogenous parameter. (JEL D21, D22, E32, F44, L11, L25)

  September 22, 2017   doi: 10.1111/ecin.12499   open full text
• Measuring The World Natural Rate Of Interest.
  Mark A. Wynne, Ren Zhang.
  Economic Inquiry. September 22, 2017
  This article makes the first attempt to estimate the time‐varying natural rate jointly with the output gap and trend potential output growth for the world as a whole using a simple unobserved components model broadly following the methodology developed by Laubach, T., and J. Williams (“Measuring the Natural Rate of Interest.” Review of Economics and Statistics, 85(4), 2003, 1063–1070). We find that the world natural rate has been trending down for the past few decades. Over a quarter of the variation in the natural rate is accounted for by the trend potential output growth rate. However, the relationship between the world natural interest rate and the world trend growth is modest and not statistically significant. (JEL E4, E52, E32, C32)

  September 22, 2017   doi: 10.1111/ecin.12500   open full text
• Disappointment Aversion And Social Comparisons In A Real‐Effort Competition.
  Simon Gächter, Lingbo Huang, Martin Sefton.
  Economic Inquiry. September 21, 2017
  We present an experiment to investigate the source of disappointment aversion in a sequential real‐effort competition. Specifically, we study the contribution of social comparison effects to the disappointment aversion previously identified in a two‐person real‐effort competition (Gill, D., and V. Prowse. “A Structural Analysis of Disappointment Aversion in a Real Effort Competition.” American Economic Review, 102, 2012, 469–503). To do this we compare “social” and “asocial” versions of the Gill and Prowse experiment, where the latter treatment removes the scope for social comparisons. If disappointment aversion simply reflects an asymmetric evaluation of losses and gains we would expect it to survive in our asocial treatment. Alternatively, if losing to or winning against another person affects the evaluation of losses/gains, as we show would be theoretically the case under asymmetric inequality aversion, we would expect treatment differences. We find behavior in social and asocial treatments to be similar, suggesting that social comparisons have little impact in this setting. Unlike in Gill and Prowse we do not find evidence of disappointment aversion. (JEL C91, D12, D81, D84)

  September 21, 2017   doi: 10.1111/ecin.12498   open full text
• The Timing Of Exemptions From Welfare Work Requirements And Its Effects On Mothers' Work And Welfare Receipt Around Childbirth.
  Jiyoon Kim.
  Economic Inquiry. September 20, 2017
  I quantify the effects of welfare work exemptions on women's labor force participation and welfare receipt. This study, which also examines the age of youngest child (AYC) exemption, is the first to investigate the pregnancy exemption. Between‐state and within‐state variations in exemption length allow me to estimate the heterogeneous effects of each exemption by its timing and strictness. I find that the effects on labor force participation are driven by employment for the pregnancy exemption, inducing relatively stable welfare receipts. In contrast, the effects are driven by unemployment for the AYC exemption, which triggers more reliance on welfare after birth. (JEL I38)

  September 20, 2017   doi: 10.1111/ecin.12496   open full text
• On The Optimal Realignment Of A Contest: The Case Of College Football.
  Stefan Szymanski, Jason Winfree.
  Economic Inquiry. September 19, 2017
  This article examines the relationship between demand and scheduling in college football. We first derive two different metrics for team quality, and then use those metrics to see how they impact attendance. We find that there is a positive interaction between the quality of the teams. Then various simulations are run to see how attendance would change under different scheduling scenarios. If teams are put into conferences based on the team quality measures, the average per game attendance only rises 1–2%. This is true if 1‐year or 10‐year quality measures are used. However, our simulation suggests that this effect would be more than offset, mainly because schools with larger capacity would play fewer home games and so aggregate attendance would fall. We discuss whether this effect would be mitigated by capacity adjustments in the longer term. (JEL L83, Z20, C78)

  September 19, 2017   doi: 10.1111/ecin.12493   open full text
• Latin America's Declining Skill Premium: A Macroeconomic Analysis.
  Juan F. Guerra‐Salas.
  Economic Inquiry. September 19, 2017
  The decline in Latin America's skill premium and income inequality during the 2000s was partly driven by an economic expansion that favored low‐skill‐intensive service sectors. Evidence shows inequality becomes countercyclical in the 2000s, and unlike previous expansions, the boom was concentrated on services while manufacturing lagged behind. I build an open economy general equilibrium model that features a low‐skill‐intensive nontradable sector. The model suggests that favorable shocks to commodity prices and international interest rate spreads, such as those that buffeted Latin America in the 2000s, account for about a fifth of the observed decline in the skill premium. (JEL D31, E32, F41, O15, O54)

  September 19, 2017   doi: 10.1111/ecin.12497   open full text
• Optimal Employee Ownership Contracts Under Ambiguity Aversion.
  Nicolas Aubert, Hachmi Ben Ameur, Guillaume Garnotel, Jean‐Luc Prigent.
  Economic Inquiry. September 01, 2017
  The aim of this paper is to compute and describe the conditions of an optimal employee ownership contract between an employer and an ambiguity‐averse employee. We then introduce ambiguity aversion in the baseline model of Aubert et al. (2014) using the multiple prior preferences of Gilboa and Schmeidler (1989) and its extension proposed by Maccheroni et al. (2006). This model offers solutions that reconcile labor and financial economics and behavioral economics research findings on employee ownership. The paper focuses on the most common situation where employee ownership has a positive impact on corporate performance, but can also be used as an entrenchment mechanism. We determine the optimal company stock contribution, which corresponds to a perfect subgame Nash equilibrium in the ambiguity framework. Using the framework of Gilboa and Schmeidler (1989), we show that the optimal ownership contract is increasing with respect to the lower bound of the return expectation in the case of a high level of effort, and decreasing with respect to the upper bound of the return expectation in the case of a low level of effort. In the framework of Maccheroni et al. (2006), we prove that if aversion to ambiguity is sufficiently high, then we find the same behavior as in the case of no ambiguity. (JEL G11, G32, G34, J33)

  September 01, 2017   doi: 10.1111/ecin.12478   open full text
• The Effects Of Education On Fertility: Evidence From Taiwan.
  Kamhon Kan, Myoung‐Jae Lee.
  Economic Inquiry. August 31, 2017
  This study investigates the impact of women's education on fertility. For identification, we use the 1968 compulsory education law change in Taiwan, which generated a regression discontinuity design (RDD) setting. We use the whole population of women from the 1980 and 2010 Population Censuses. Results of our RDD estimation using the exact date of birth suggest that the law change was effective in boosting women's education, but it did not have any impact on fertility. This is in stark contrast to most previous studies using only the birth year as the running variable or using it to construct instruments, which find that women's education depresses fertility. This study demonstrates that using a discrete running variable in RDD may generate a false discontinuity for an otherwise continuous regression function. (JEL J13, C21, I2)

  August 31, 2017   doi: 10.1111/ecin.12492   open full text
• Subsidizing Altruism In Living Organ Donation.
  Kurt E. Schnier, Robert M. Merion, Nicole Turgeon, David Howard.
  Economic Inquiry. August 30, 2017
  The current supply of deceased donor organs is insufficient to meet the growing demand for transplantable organs. Consequently, candidates for kidney transplantation are encouraged to find a living donor. In 2008, the Department of Health and Human Services began to reimburse donors' travel‐related expenses via the National Living Donor Assistance Center (NLDAC). Using variation in transplant centers' applications for donor assistance, we use a difference‐in‐difference model to estimate the relationship between the NLDAC and living donor kidney transplants. We find that among participating transplant centers, the program increased the number of living donor kidney transplants by approximately 14%. (JEL I12, I18, D64)

  August 30, 2017   doi: 10.1111/ecin.12488   open full text
• Fair Allocation When Players' Preferences Are Unknown.
  Kang Rong.
  Economic Inquiry. August 30, 2017
  Suppose an arbitrator needs to allocate an asset among two players, whose claims on the asset are incompatible. The allocation outcome is said to be fair if the arbitrator awards an outcome that brings the same utility payoff to the two players whenever the two players' claims are symmetric and the allocation set is symmetric. In conjunction with other natural axioms, this fairness requirement implies a unique allocation outcome for any claims problem. We propose a mechanism which can be used by the arbitrator to implement this allocation outcome, even when the players' preferences are unknown to the arbitrator. (JEL C78, D63, J52)

  August 30, 2017   doi: 10.1111/ecin.12494   open full text
• Leaning Against Windy Bank Lending.
  Giovanni Melina, Stefania Villa.
  Economic Inquiry. August 29, 2017
  Using an estimated dynamic stochastic general equilibrium model with banking, this paper first provides evidence that monetary policy reacted to bank loan growth in the United States during the Great Moderation. It then shows that the optimized simple interest‐rate rule features no response to the growth of bank credit. However, the welfare loss associated to the empirical responsiveness is small. The sources of business cycle fluctuations are crucial in determining whether a “leaning‐against‐the‐wind” policy is optimal or not. In fact, the predominant role of supply shocks in the model gives rise to a trade‐off between inflation and financial stabilization. (JEL E32, E44, E52)

  August 29, 2017   doi: 10.1111/ecin.12491   open full text
• Bad Reputation Under Bounded And Fading Memory.
  Benjamin Sperisen.
  Economic Inquiry. August 22, 2017
  I relax the full memory assumption in Ely and Välimäki's (2003) mechanic game, where reputation is bad. Under bounded memory (only recent periods are observed), long memory still yields bad reputation due to an “echo” where bad signals cause future motorists to not hire, causing further lack of hiring, and so on. Short memory avoids bad reputation by making it “useless,” because consumers never learn enough information to change their decisions. No “happy middle” exists under bounded memory where consumers learn valuable information without tempting the mechanic into harmful signaling and thereby unraveling the market. By contrast, “fading memory” (past periods are randomly sampled with “fading” probabilities) achieves this happy middle by offering valuable information in a way that bounds the probabilities of these reputational echoes. Possible fading memory implementations (e.g., for review websites) are described and generalized to a broader class of games. (JEL C73, D8)

  August 22, 2017   doi: 10.1111/ecin.12460   open full text
• Learning About Education.
  Patrick M. Emerson, Bruce McGough.
  Economic Inquiry. August 22, 2017
  Limited human capital investment is a common characteristic of low‐income countries despite the fact that estimated returns to educational investment in low‐income countries are generally higher than those in high‐income countries. Empirical evidence suggests that income and credit constraints can only account for a part of this underinvestment. Recent experimental evidence shows that families' misperceptions about the returns to education play a role in their low‐investment levels. This paper builds a heterogeneous‐agent model of human capital and growth that incorporates an adaptive learning mechanism to capture the way agents form perceptions about returns to education. We find natural conditions guaranteeing existence of stable equilibria. Along transition paths, agents' misperceptions about returns to education depress realized returns, which serves to reenforce and perpetuate low human‐capital investment. If human capital investments have both private and public returns, we find multiple stable equilibria, including those which are characterized by low investment and low returns. (JEL D83, O10, I25)

  August 22, 2017   doi: 10.1111/ecin.12487   open full text
• Prices, Inflation, And Smoking Onset: The Case Of Argentina.
  G. Emmanuel Guindon, Guillermo R. Paraje, Ricardo Chávez.
  Economic Inquiry. August 16, 2017
  This article examines the effect of tobacco prices on the decision to start smoking in Argentina. Argentina is an interesting case to explore given its high smoking rates, its recent experience with periods of very high and hyperinflation, and the mixed evidence of the effect of prices on smoking onset, particularly in low‐ and middle‐income countries. We used data from four cycles of two large national surveys conducted between 2005 and 2011 and discrete‐time hazard models. We found that tobacco prices had a statistically significant and fairly large impact on the hazard of smoking onset, and these findings were robust to alternative specifications. We also found that prices had little effect on the hazards of smoking onset during periods of hyper‐ and very high inflation, which provide some support for the notion that prices lose their informational role in such periods. Governments need to be cognizant that their most important policy tool to reduce tobacco use—taxes that increase real tobacco prices—is likely no longer effective during these times. (JEL C41, H20, I12, I18)

  August 16, 2017   doi: 10.1111/ecin.12490   open full text
• Measuring Consumer Expenditures With Payment Diaries.
  Scott Schuh.
  Economic Inquiry. August 11, 2017
  Payment diaries measure consumer expenditures by tracking authorization of payments by instrument (cash, check, debit or credit card, etc.). Three notable results emerge from comparing the 2012 Diary of Consumer Payment Choice (DCPC) to other estimates of consumer expenditures: (1) DCPC payments are 75% higher than Consumer Expenditure Survey estimates; (2) DCPC consumption estimates are 17% higher than comparable personal consumption expenditure estimates; and (3) DCPC payments roughly equal comparably adjusted National Income and Product Accounts personal disposable income. The DCPC's relative success stems from measuring expenditures aggregated into lumpy payments (“shopping baskets”), relatively low respondent burden, and effective random sampling. (JEL E21, D12, D14)

  August 11, 2017   doi: 10.1111/ecin.12485   open full text
• Reputation Transmission Without Benefit To The Reporter: A Behavioral Underpinning Of Markets In Experimental Focus.
  Kenju Kamei, Louis Putterman.
  Economic Inquiry. August 10, 2017
  Reputation is a commonly cited check on opportunism, but it is often unclear what motivates an agent to report another's behavior when it is easy for the aggrieved individual to move on. In a sharply focused laboratory experiment, we find that many cooperators pay to report a defecting partner without the possibility of pecuniary benefit when this has the potential to deprive the latter of future gains and to help his next partner. We illustrate how a social preference can explain such costly reporting, and also discuss evidence for a role of emotions. (JEL C91, D03, D63)

  August 10, 2017   doi: 10.1111/ecin.12477   open full text
• Fiscal Rules And Government Borrowing Costs: International Evidence.
  John Thornton, Chrysovalantis Vasilakis.
  Economic Inquiry. August 10, 2017
  We find that the adoption of numerical fiscal rules reduces government borrowing costs in a sample of 101 advanced and developing countries for 1985–2010. We apply a variety of propensity score matching methods to address the self‐selection problem of policy adoption and find strong evidence that fiscal rules have large and significant treatment effects on lowering government borrowing costs in both international and domestic financial markets. The results are robust to changes in country sample and alternative estimation methodology, and are consistent with fiscal rules helping to build policy credibility by reducing the probability of default and the “risk premium” on government debt that compensates lenders for this possibility. (JEL E43, G12, H60)

  August 10, 2017   doi: 10.1111/ecin.12484   open full text
• Multifaceted Aid For Low‐Income Students And College Outcomes: Evidence From North Carolina.
  Charles T. Clotfelter, Steven W. Hemelt, Helen F. Ladd.
  Economic Inquiry. August 10, 2017
  We study the evolution of a campus‐based aid program for low‐income students that began with grant‐heavy financial aid and later added a suite of nonfinancial supports. We find little to no evidence that program eligibility during the early years (2004–2006), in which students received additional institutional grant aid and few nonfinancial supports, improved postsecondary progress, performance, or completion. In contrast, program‐eligible students in more recent cohorts (2007–2010), when the program supplemented grant‐heavy aid with an array of nonfinancial supports, were more likely to meet credit accumulation benchmarks toward timely graduation and earned higher grade point averages than their barely ineligible counterparts. (JEL I21, I23, I24, J08)

  August 10, 2017   doi: 10.1111/ecin.12486   open full text
• Providing Global Public Goods: Electoral Delegation And Cooperation.
  Martin G. Kocher, Fangfang Tan, Jing Yu.
  Economic Inquiry. July 27, 2017
  This study experimentally examines the effect of electoral delegation on providing global public goods shared by several groups. Each group elects one delegate who can freely decide on each group member's contribution to the global public goods. Our results show that people mostly vote for delegates who assign equal contributions for every group member. However, in contrast to standard theoretical predictions for our delegation mechanism, unequal contributions across groups drive cooperation down over time, and it decreases efficiency by almost 50% compared to the selfish benchmark. This pattern is not driven by delegates trying to exploit their fellow group members, as indicated by theory. It is driven by conditional cooperation of delegates across groups. Since one of the potential sources of the resulting inefficiency is the polycentric nature of global public goods provision together with other‐regarding preferences, we use the term P‐inefficiency to describe our finding. (JEL C92, D72, H41)

  July 27, 2017   doi: 10.1111/ecin.12482   open full text
• Gender Performance Gaps: Quasi‐Experimental Evidence On The Role Of Gender Differences In Sleep Cycles.
  Lester Lusher, Vasil Yasenov.
  Economic Inquiry. July 26, 2017
  Sleep studies suggest that girls go to sleep earlier, are more active in the morning, and cope with sleep deprivation better than boys. We provide the first causal evidence on how gender differences in sleep cycles can help explain the gender performance gap. We exploit over 240,000 assignment‐level grades from a quasi‐experiment where students' schedules alternated between morning and afternoon start times each month. Relative to girls, we find that boys' achievement benefits from a later start time. For classes taught at the beginning of the school day, our estimates explain up to 16% of the gender performance gap. (JEL H52, I20, I21)

  July 26, 2017   doi: 10.1111/ecin.12483   open full text
• Classroom Diversity And Academic Outcomes.
  Angela K. Dills.
  Economic Inquiry. July 25, 2017
  This paper tests how the race and ethnicity of one's college classmates affect academic performance. Incoming students at a Catholic college are assigned to their first semester, team‐taught, required course. Statistical tests support that this assignment is uncorrelated with a variety of student characteristics. Controlling for team fixed effects and student characteristics, I find evidence of racial peer effects that differ for white students and students of color. White students earn higher grades in classes with more students of color. Students of color with more nonwhite classmates earn lower grades; these effects occur exclusively among those with lower SAT scores. (JEL I21, I28)

  July 25, 2017   doi: 10.1111/ecin.12481   open full text
• The Religious Observance Of Ramadan And Prosocial Behavior.
  Ernan E. Haruvy, Christos A. Ioannou, Farnoush Golshirazi.
  Economic Inquiry. July 25, 2017
  We investigate experimentally the impact on prosocial behavior of the religious observance of Ramadan. Our sample consists of male factory workers in a manufacturing facility in a Muslim country. In our between‐subjects' design, each worker is asked to allocate an amount of money between himself and a stranger. Specifically, we examine behavior of observants and nonobservants before and after the daily break of the Ramadan fast. We also examine behavior outside of Ramadan, where we treat alimentary abstention as akin to a long fasting period. We hypothesize and confirm that outside Ramadan, decision makers who abstain from any alimentary intake transfer less money to recipients relative to decision makers who do not abstain. Strikingly, this effect is reversed during the month of Ramadan. Specifically, observant workers who are in the midst of their Ramadan fast are far more generous to recipients than workers who have had their evening meal. Interestingly, observant and nonobservant workers after the daily break of the Ramadan fast and workers outside Ramadan that consumed aliments make statistically similar transfers. Our findings suggest that it is the interaction between alimentary abstention and religious observance that amplifies prosocial behavior during Ramadan, where fasting is part of the ritual. (JEL C91, C93, C72)

  July 25, 2017   doi: 10.1111/ecin.12480   open full text
• Entertaining Malthus: Bread, Circuses, And Economic Growth.
  Rohan Dutta, David K. Levine, Nicholas W. Papageorge, Lemin Wu.
  Economic Inquiry. July 25, 2017
  Motivated by the basic adage that man does not live by bread alone, we offer a theory of historical economic growth and population dynamics where human beings need food to survive, but enjoy other things, too. Our model imposes a Malthusian constraint on food, but introduces a second good to the analysis that affects living standards without affecting population growth. We show that technological change does a good job explaining historical consumption patterns and population dynamics, including the Neolithic Revolution, the Industrial Revolution, and the Great Divergence. Our theory stands in contrast to models that assume a single composite good and a Malthusian constraint. These models generate negligible growth prior to the Industrial Revolution. However, recent revisions to historical data show that historical living standards—though obviously much lower than today's—varied over time and space much more than previously thought. These revisions include updates to Maddison's dataset, which served as the basis for many papers taking long‐run stagnation as a point of departure. This new evidence suggests that the assumption of long‐run stagnation is problematic. Our model shows that when we give theoretical accounting of these new observations the Industrial Revolution is much less puzzling. (JEL B10, I31, J1, N1, O30)

  July 25, 2017   doi: 10.1111/ecin.12479   open full text
• Inequality And Growth In The United States: Why Physical And Human Capital Matter.
  Nikos Benos, Stelios Karagiannis.
  Economic Inquiry. July 14, 2017
  We investigate the relationship between economic growth and top income inequality under the influence of human and physical capital accumulation, using an annual panel of U.S. state‐level data. Our analysis is based upon the “unified” framework offered by Galor and Moav (2004) while the empirics account for cross‐section dependence, parameter heterogeneity, and endogeneity, in nonstationary series. We conclude that changes in inequality do not influence growth, neither in the short run nor in the long run in the United States as a whole in the 1929–2013 period. Our findings are robust to the inclusion of overall income inequality measures. These findings provide support for the theoretical prediction of the unified theory of inequality and growth, according to which the growth effect of inequality becomes insignificant in the latest stages of economic development that the United States experiences during our period of investigation. Therefore, future policies aiming at moderating the concentration at the upper end of income distribution are not likely to have adverse growth consequences in developed countries such as the United States. (JEL I21, O47, C23)

  July 14, 2017   doi: 10.1111/ecin.12475   open full text
• Peer Effects In A Competitive Environment: Evidence From The Pga Tour.
  Daniel C. Hickman, Neil E. Metz.
  Economic Inquiry. July 07, 2017
  This study uses putting on the PGA TOUR to examine peer effects in a competitive setting. The nature of play in golf, in which players complete tasks in a discrete order with a group of randomly assigned peers, provides a unique opportunity to observe these effects among individuals competing in a high‐stakes tournament. Players have the chance both to learn from their peers, as well as to be psychologically impacted by peer success or failure. We find that learning by observing peers has a positive impact on a player's performance, while peer outcomes are negatively correlated with a player's own performance. (JEL D03, D83, L83)

  July 07, 2017   doi: 10.1111/ecin.12476   open full text
• The Effect Of Minimum Wages On Employment: A Factor Model Approach.
  Evan Totty.
  Economic Inquiry. July 06, 2017
  This paper uses factor model methods to resolve issues in the minimum wage‐employment debate. Factor model methods provide a more flexible way of addressing concerns related to unobserved heterogeneity that are robust to critiques from either side of the debate. The factor model estimators produce minimum wage‐employment elasticity estimates that are much smaller than the traditional ordinary least squares (OLS) results and are not statistically different from zero. These results hold for many specifications and datasets from the minimum wage‐employment literature. A simulation shows that unobserved common factors can explain the different estimates seen across methodologies in the literature. (JEL C23, J21, K31)

  July 06, 2017   doi: 10.1111/ecin.12472   open full text
• The Protestant Fiscal Ethic: Religious Confession And Euro Skepticism In Germany.
  Adrian Chadi, Matthias Krapf.
  Economic Inquiry. July 05, 2017
  During the European sovereign debt crisis, most countries that ran into fiscal trouble had Catholic majorities, whereas countries with Protestant majorities were able to avoid fiscal problems. We find that Christian‐conservative members of the German parliament from constituencies with higher shares of Protestants were more likely to vote against a third bailout for Greece. Survey data show that views on the euro differ between German Protestants and non‐Protestants at the individual level, too. Among Protestants, concerns about the euro have, compared to non‐Protestants, increased during the crisis. We show that this increase in concern is linked to a reduction of Protestants' subjective well‐being. We use the timing of survey interviews and news events in 2011 to account for the endogeneity of euro concerns. Emphasis on moral hazard concerns in Protestant theology may, thus, still shape economic preferences. (JEL D72, E00, I31, Z12)

  July 05, 2017   doi: 10.1111/ecin.12474   open full text
• The Rise Of Services, Deindustrialization, And The Length Of Economic Recovery.
  Martha L. Olney, Aaron Pacitti.
  Economic Inquiry. July 04, 2017
  Economic recovery is longer in service‐providing economies than in goods‐producing economies. Services cannot be produced and inventoried ahead of demand; goods can. We are the first to document this macroeconomic repercussion of the sectoral shift away from the secondary sector toward the tertiary sector, that is, of deindustrialization and the rise of services. We distinguish between nontradable services and all other sectors, using U.S. state‐level employment data for post‐1960 recessions. Concerns over the endogeneity of services are addressed in two ways: by using 3‐year pre‐recession averages of sector shares, and separately by invoking instrumental variables. Our results are robust to alternative specifications. The increase in service production and deindustrialization in the United States over the last half‐century lengthens the trough‐to‐peak employment recovery from recessions by about 40%. (JEL E24, E32, L80, N12)

  July 04, 2017   doi: 10.1111/ecin.12467   open full text
• Repeated Lobbying By Commercial Lobbyists And Special Interests.
  Thomas Groll, Christopher J. Ellis.
  Economic Inquiry. July 04, 2017
  Developing a lobbying model of repeated agency, we explain previously unexplained features of the real‐world lobbying industry. Lobbying is divided between direct representation by special interests to policymakers, and indirect representation where special interests employ professional intermediaries called commercial lobbyists to lobby policymakers on their behalf. Our analytical structure allows us to explain several trends in lobbying. For example, using the observation that in the United States over the last 20 years, policymakers have spent an increasing amount of their time fundraising as opposed to legislating, we are able to explain why the share of commercial lobbyist activity in total lobbying has risen dramatically and now constitutes over 60% of the total. The key scarce resource in our analysis is policymakers' time. Policymakers allocate this resource via implicit repeated agency contracts that are used to incent special interests and commercial lobbyists to provide a mix of financial contributions and information on policy proposals. These implicit agency contracts solve both an information problem in the presence of unverifiable policy information and a contracting problem in the absence of legal enforcement. These repeated relationships, that are often described using the pejorative term “cronyism” in the popular press, may in certain circumstances be welfare improving. (JEL D72, D82, H1, P16)

  July 04, 2017   doi: 10.1111/ecin.12473   open full text
• An Open‐Economy Model With Money, Endogenous Search, And Heterogeneous Firms.
  Lucas Herrenbrueck.
  Economic Inquiry. July 03, 2017
  This paper describes a new monetary open‐economy model where firms have market power due to search frictions in the goods market, and endogenous search effort by consumers mitigates this market power. The optimal inflation rate generally depends positively on the cost of search effort, the cost of firm entry, and the cost of trade. Higher inflation always improves a country's terms‐of‐trade against its trading partners. I also characterize a general class of matching processes which offer a novel approach to modeling firm sales. (JEL D43, E40, F12)

  July 03, 2017   doi: 10.1111/ecin.12471   open full text
• Introduction To Symposium On “Engineering Data On Individual And Family Decisions Over The Life Cycle”.
  Andrew Caplin.
  Economic Inquiry. June 22, 2017
  There is no abstract available for this paper.

  June 22, 2017   doi: 10.1111/ecin.12468   open full text
• European Central Bank Footprints On Inflation Forecast Uncertainty.
  Svetlana Makarova.
  Economic Inquiry. June 22, 2017
  The finding of the paper shows the relative effectiveness of the “one size fits all” policy of the European Central Bank. The paper provides strong evidence in favor of this by testing whether the monetary policy effects (footprints) found in inflation uncertainty converge to a common level. These footprints are measured as the fraction of the estimated policy‐induced reduction in this uncertainty. The testing was conducted by applying a bootstrap‐type test in a regression of the rate of growth of these fractions on their initial values, computed for 16 euro area countries. (JEL C33, E52, E58)

  June 22, 2017   doi: 10.1111/ecin.12469   open full text
• College Choice As A Collective Decision.
  Nick Huntington‐Klein.
  Economic Inquiry. June 21, 2017
  Although the choice between colleges can be thought of as being made collectively by a family, models of educational choice almost universally portray the decision as made by the student alone. Using a novel experimental method for identifying collective decision functions, I find that students have more influence than parents over the decision, but not exclusive control. Students care more than parents about classroom experience and future earnings. Ignoring the dual‐agent nature of the decision can weaken predictions and lead to poorly targeted policy designs. (JEL I21, J24, D13)

  June 21, 2017   doi: 10.1111/ecin.12470   open full text
• Forward Guidance And The State Of The Economy.
  Benjamin D. Keen, Alexander W. Richter, Nathaniel A. Throckmorton.
  Economic Inquiry. June 13, 2017
  This paper analyzes forward guidance in a nonlinear model with a zero lower bound (ZLB) on the nominal interest rate. Forward guidance is modeled with news shocks to the monetary policy rule, which capture innovations in expectations from central bank communication about future policy rates. Whereas most studies use quasi‐linear models that disregard the expectational effects of hitting the ZLB, we show how the effectiveness of forward guidance nonlinearly depends on the state of the economy, the speed of the recovery, the degree of uncertainty, the policy shock size, and the forward guidance horizon when households account for the ZLB. (JEL E43, E58, E61)

  June 13, 2017   doi: 10.1111/ecin.12466   open full text
• Electoral Contributions And The Cost Of Unpopularity.
  Thomas Bassetti, Filippo Pavesi.
  Economic Inquiry. June 07, 2017
  When considering electoral campaigns, candidates receiving contributions from relatively unpopular industries should be regarded less favorably by voters that have information on the sources of funding. To offset this unpopularity effect, politicians may either demand more money for campaign advertising from these industries in order to persuade less informed voters, or shy away from unpopular contributors to avoid losing the support of the informed electorate. Our model predicts that the first effect dominates, and electoral contributions are increasing in industry unpopularity. By using U.S. House elections data and different identification strategies, we provide robust evidence in favor of our predictions. (JEL D72, P16)

  June 07, 2017   doi: 10.1111/ecin.12461   open full text
• Midweek Effect On Soccer Performance: Evidence From The German Bundesliga.
  Alex Krumer, Michael Lechner.
  Economic Inquiry. June 07, 2017
  The home advantage phenomenon is a well‐established feature in sports competitions. In this study, we examine data from 2,013 soccer matches played in the German Bundesliga during the seasons from 2007–2008 to 2016–2017. Using a very rich data set, our econometric analysis that is based on matching methods reveals that the usual home advantage disappears when the game is in the middle of the week instead of being on the weekend. Our results indicate that, as the midweek matches are unevenly allocated among teams, the actual schedules of the Bundesliga favor teams with fewer home games in midweek. The study also shows that these soccer‐specific findings may have some implications for the design of contests in general. (JEL D00, L00, D20, Z20)

  June 07, 2017   doi: 10.1111/ecin.12465   open full text
• Penalty Structures And Deterrence In A Two‐Stage Model: Experimental Evidence.
  Lisa R. Anderson, Gregory DeAngelo, Winand Emons, Beth Freeborn, Hannes Lang.
  Economic Inquiry. June 07, 2017
  Multiperiod models of criminal enforcement based on the standard economic approach of Becker (1968) generally find that the optimal penalty structure is either flat or declining. We present the first experimental test of a two‐stage theoretical model that predicts decreasing penalty structures will yield greater deterrence than increasing penalty structures. This prediction is based on the belief that if the penalty for the first offenses is sufficiently low, the agent should commit the offense and continue to offend if undetected. Our results are consistent with the theoretical prediction that decreasing fine structures are more effective at reducing risky behavior. (JEL C91, K42, K10)

  June 07, 2017   doi: 10.1111/ecin.12464   open full text
• Perceived Game Uncertainty, Suspense And The Demand For Sport.
  Tim Pawlowski, Georgios Nalbantis, Dennis Coates.
  Economic Inquiry. May 31, 2017
  This study tries bridging between different behavioral economic explanations for the lack of support of the uncertainty of outcome hypothesis in spectator sports. We test a measure of perceived game uncertainty that is comparable to objective measures frequently tested in the literature. Econometric results suggest that fans do not perceive closeness of a game differently than how economists have tended to measure it. However, fans' perceptions of suspensefulness are distinct from their perceptions of game uncertainty. Moreover, the finding that fans' preferences for game uncertainty are dominated by loss aversion also emerges—independently of fanship status—in our stated‐preference setting. (JEL L83, D12, Z2)

  May 31, 2017   doi: 10.1111/ecin.12462   open full text
• The Optimal Taxation Of Asset Income When Government Consumption Is Endogenous: Theory, Estimation And Welfare.
  Michael Ben‐Gad.
  Economic Inquiry. May 31, 2017
  This paper derives the Ramsey optimal fiscal policy for taxing asset income in a model where government expenditure is a function of net output or the inputs that produce it. Extending work by Kenneth L. Judd, I demonstrate that the canonical result that the optimal tax on capital income is zero in the medium to long term is a special case of a more general model. Employing a vector error correction model to estimate the relationship between government consumption and net output or the factor inputs that generate it for the United States between 1948Q1 and 2015Q4, I demonstrate that this special case is empirically implausible, and show how a cointegrating vector can be used to determine the optimal tax schedule. I simulate a version of the model using the empirical estimates to measure the welfare implications of changing the tax rate on asset income, and contrast these results with those generated in a version of the model where government consumption is purely exogenous. The shifting pattern of welfare measurements confirms the theoretical results. I calculate that the prevailing effective tax rate on net asset income in the United States between 1970 and 2014 averaged 0.449. Hence abolishing the tax completely does generate welfare improvements, though only by the equivalent of between 1.103% and 1.616% permanent increase in consumption—well under half the implied welfare benefit when the endogeneity of the government consumption is ignored. The maximum welfare improvement from shifting part of the burden of tax from capital to labor is the equivalent of a permanent increase in consumption of between only 1.491% and 1.858%, and is attained when the tax rate on asset income is lowered to between 0.148 and 0.186. Allowing the tax rate to vary over time raises the maximum welfare benefit to 1.865%. All the results are very robust to a wide range of elasticities of labor supply. (JEL E62, H21, H50)

  May 31, 2017   doi: 10.1111/ecin.12463   open full text
• Charitable Giving, Emotions, And The Default Effect.
  Lenka Fiala, Charles N. Noussair.
  Economic Inquiry. May 26, 2017
  We report an experiment to study the effect of defaults on charitable giving. In three different treatments, participants face varying default levels of donation. In three other treatments that are paired with the first three, they receive the same defaults, but are informed that defaults are thought to have an effect on their donation decisions. The emotional state of all individuals is monitored throughout the sessions using Facereading software, and some participants are required to report their emotional state after the donation decision. We find that the level at which a default is set has no effect on donations, and informing individuals of the possible impact of defaults also has no effect. Individuals who are happier and in a more positive overall emotional state donate more. Donors experience a negative change in the valence of their emotional state subsequent to donating, when valence is measured with Facereading software. This contrasts with the self‐report data, in which donating correlates with a more positive reported subsequent emotional state. (JEL C91)

  May 26, 2017   doi: 10.1111/ecin.12459   open full text
• Knowledge Spillovers And Output Per Worker: An Industry‐Level Analysis For Oecd Countries.
  Ioannis Bournakis, Dimitris Christopoulos, Sushanta Mallick.
  Economic Inquiry. May 17, 2017
  This study analyzes the impact of knowledge spillovers on output per worker at the industry level using a primal production function approach. The article makes three different contributions to the international spillovers literature: (1) it identifies trade‐related spillovers under alternative assumptions regarding the information transferred through imports; (2) it explores the importance of horizontal and vertical foreign direct investment (FDI) in knowledge spillovers; and (3) it looks at how institutional factors determine the impact of FDI‐related spillovers on productivity. The main findings of the study are: (1) international knowledge spillover is an important driver of industry output per worker, and the magnitude of this spillover effect varies with alternative assumptions about the information content embodied in imports, while high technology industries benefit significantly more from import‐related knowledge spillovers; and (2) the gains from FDI spillovers are primarily horizontal, but when institutional factors are considered, countries with stronger protection of intellectual property rights and a high “ease of doing business” tend to experience a substantial increase in the effectiveness of both horizontal and vertical FDI‐related spillovers. (JEL E24, F1, F6, O3, O4)

  May 17, 2017   doi: 10.1111/ecin.12458   open full text
• The Long‐Term Effects Of Conditional Cash Transfers On Child Labor And School Enrollment.
  Marcel Peruffo, Pedro Cavalcanti Ferreira.
  Economic Inquiry. May 13, 2017
  This paper investigates the long‐term effects of conditional cash transfers on school attainment and child labor. To this end, we construct a dynamic heterogeneous agent model, calibrate it with Brazilian data, and introduce a policy similar to the Brazilian Bolsa Família. Our results suggest that this type of policy has a very strong impact on educational outcomes, sharply increasing primary school completion. The conditional transfer is also able to reduce the share of working children from 22% to 17%. We then compute the transition to the new steady state and show that the program actually increases child labor over the short run, because the transfer is not enough to completely cover the schooling costs, so children have to work to be able to comply with the program's schooling eligibility requirement. We also evaluate the impacts on poverty, inequality, and welfare. (JEL O11, I25, J24)

  May 13, 2017   doi: 10.1111/ecin.12457   open full text
• Mandatory Retirement And The Consumption Puzzle: Disentangling Price And Quantity Declines.
  Yingying Dong, Dennis Tao Yang.
  Economic Inquiry. May 12, 2017
  This study investigates changes in household consumption at retirement based on a comprehensive, diary‐based household survey from China. We focus on disentangling price changes from quantity changes at retirement. The mandatory retirement policy in China provides a quasi‐experimental setting for nonparametric identification of the true causal effects of fully anticipated retirement. Using a regression discontinuity design, we find that food expenditure declines at retirement, particularly among the less‐educated group. We further show that this decline is driven by a reduction in prices rather than quantities. These findings, along with a documented increase in shopping time for food upon retirement among the less‐educated households, are consistent with a time allocation model in which education enhances the value of leisure. (JEL J26, C21)

  May 12, 2017   doi: 10.1111/ecin.12456   open full text
• Information Transmission And Ownership Consolidation In Aid Programs.
  Axel Dreher, Sarah Langlotz, Silvia Marchesi.
  Economic Inquiry. May 04, 2017
  We investigate the degree of leeway donors of foreign aid should grant to recipient governments when their preferences over how to implement the aid are different, and both the donor and recipient possess some private information about the most effective policies. Intuitively, our model shows that donors should stay in control of how their aid is spent when their own private information is more important than the private information of the recipient. Less obviously, an increase in the difference of preferences between donors and recipients can increase rather than decrease the leeway that donors should grant the recipients, as the recipients' information gains in importance relative to those of the donors, and recipients become less likely to communicate truthfully. We test the model using dyadic data for 28 bilateral aid donors and 112 recipients, over the 1995–2010 period. Our proxy for “centralized” aid is project aid, while budget aid leaves more leeway to the recipient and thus proxies for “decentralized” aid. In line with the model, misaligned interests and informational asymmetries indeed influence the shares of aid given as budget and project aid. (JEL C23, D82, F33,O1)

  May 04, 2017   doi: 10.1111/ecin.12450   open full text
• Citations Or Journal Quality: Which Is Rewarded More In The Academic Labor Market?
  John Gibson, David L. Anderson, John Tressler.
  Economic Inquiry. May 02, 2017
  Research quality can be evaluated from citations or from the prestige of journals publishing the research. We relate salary of tenured University of California (UC) economists to their lifetime publications of 5,500 articles and to the 140,000 citations to these articles. Citations hardly affect salary, especially in top‐ranked UC departments where impacts of citations are less than one‐tenth those of journals. In lower ranked departments, and when journal quality is less comprehensively measured, effects of citations on salary increase. If journal quality is just measured by counting articles in journal tiers, apparent effects of citations are overstated. (JEL A14, J44)

  May 02, 2017   doi: 10.1111/ecin.12455   open full text
• Can School Sports Reduce Racial Gaps In Truancy And Achievement?
  Harold E. Cuffe, Glen R. Waddell, Wesley Bignell.
  Economic Inquiry. May 02, 2017
  While existing research supports that participation in high‐school athletics is associated with better education and labor‐market outcomes, the mechanisms through which these benefits accrue are not well established. Using individual microdata collected daily, and team‐specific schedules, we retrieve estimates of the causal effect of high‐school athletic participation on absenteeism, suggesting that participation decreases absences, driven primarily by reductions in unexcused absences in boys. There are also strong game‐day effects in truancy, in both boys and girls, with truancy declines on game days more than offset by subsequent absenteeism. Important heterogeneity by race, gender, and family structure may serve to substantially reduce racial gaps in truancy and achievement. (JEL I21, L83)

  May 02, 2017   doi: 10.1111/ecin.12452   open full text
• Do Minimum Wage Increases Influence Worker Health?
  Brady P. Horn, Johanna Catherine Maclean, Michael R. Strain.
  Economic Inquiry. April 28, 2017
  This study investigates whether minimum wage increases impact worker health in the United States. We consider self‐reported measures of general, mental, and physical health. We use data on lesser‐skilled workers from the 1993 to 2014 Behavioral Risk Factor Surveillance Survey. Among men, we find no evidence that minimum wage increases improve health; instead, we find that such increases lead to worse health outcomes, particularly among unemployed men. We find both worsening general health and improved mental health following minimum wage increases among women. These findings broaden our understanding of the full impacts of minimum wage increases on lesser‐skill workers. (JEL I1, I11, I18)

  April 28, 2017   doi: 10.1111/ecin.12453   open full text
• A Semiparametric Discrete Choice Model: An Application To Hospital Mergers.
  Devesh Raval, Ted Rosenbaum, Steven A. Tenn.
  Economic Inquiry. April 28, 2017
  We propose a computationally simple semiparametric discrete choice estimator to model rich consumer heterogeneity. We assume groups of observably similar consumers have similar preferences, but allow preferences to vary freely across these groups. Model flexibility is easily adjusted by setting a single tuning parameter; we suggest a cross‐validation method to do so. We analyze the model's properties in the context of hospital mergers, both analytically and via a Monte Carlo analysis. The model performs well for policy relevant substitution and welfare measures, even if misspecified, when the tuning parameter is set within the neighborhood of the value chosen by cross validation. (JEL C14, D12, I11, L41)

  April 28, 2017   doi: 10.1111/ecin.12454   open full text
• On Fruitful And Futile Tests Of The Relationship Between Search And Price Dispersion.
  Joshua Sherman, Avi Weiss.
  Economic Inquiry. April 17, 2017
  We exploit cross‐sectional and temporal differences in search intensity in order to examine the relationship between search costs and price dispersion using a hand‐collected panel data set from Jerusalem's Shuk Mahane Yehuda outdoor market. We present empirical evidence that price dispersion increases with the cost of search using several different measures of price dispersion; however, our interpretation of this finding is sensitive to the search proxy in question. We also address several acute difficulties facing empiricists seeking to test theoretical price‐dispersion models in which consumers are heterogeneous in their search behavior. (JEL L11, L13)

  April 17, 2017   doi: 10.1111/ecin.12449   open full text
• Accounting For Complementary Skill Sets: Evaluating Individual Marginal Value To A Team In The National Basketball Association.
  Joseph Kuehn.
  Economic Inquiry. April 13, 2017
  Identifying an individual worker's contribution to firm production can be difficult in a team setting where spillovers in labor productivity exist among team members. This paper studies a model of labor productivity where workers have heterogeneous abilities, and can differently affect the productivity of their fellow teammates. Applying the model to the setting of the National Basketball Association (NBA), I can identify the marginal value that a basketball player brings to a particular team lineup, both through his own individual contributions and his complementary contribution to teammates' productivity. Estimates from the model imply that teammates have a significant impact on individual player productivity, and that taking into account spillovers across teammates is important to assessing both overall team productivity and an individual player's contribution to team productivity. I then evaluate whether player complementarities are valued in the NBA labor market in terms of higher salaries, and find that they are undervalued, and that players are instead paid mainly for their individual offensive production. This creates an asymmetry between player incentives and the team objective. To assess the size of this inefficiency, the top trading cycle algorithm of Shapley and Scarf (1974) is used to identify a Pareto optimal matching between players and teams, that accounts for the complementarities between heterogeneous players' skill sets. (JEL J30, L25, L83, M51)

  April 13, 2017   doi: 10.1111/ecin.12451   open full text
• Selective Recognition: How To Recognize Donors To Increase Charitable Giving.
  Anya Samek, Roman M. Sheremeta.
  Economic Inquiry. March 27, 2017
  Recognizing donors by revealing their identities is important for increasing charitable giving. Using a framed field experiment, we show that all forms of recognition that we examine increase donations relative to the baseline treatment, and recognizing only the highest or only the lowest donors has the strongest and significant effect. We argue that selective recognition creates tournament‐like incentives. Recognizing the highest donors activates the desire to seek a “positive prize” of prestige, while recognizing the lowest donors activates the desire to avoid a “negative prize” of shame. We discuss how selective recognition can be used by charities to increase donations. (JEL C93, D64)

  March 27, 2017   doi: 10.1111/ecin.12448   open full text
• Do Terrorist Attacks Impact Exchange Rate Behavior? New International Evidence.
  Paresh Kumar Narayan, Seema Narayan, Siroos Khademalomoom, Dinh Hoang Bach Phan.
  Economic Inquiry. March 25, 2017
  This study examines whether terrorist attacks affect bilateral exchange rates. Using historical 10‐minute exchange rate data for 21 countries' currency vis‐à‐vis the U.S. dollar, we show that exchange rate returns of all countries are statistically significantly affected by terrorist attacks. Some exchange rates appreciate and some depreciate following a terrorist attack, some currencies experience exchange rate reversals while others experience a persistent effect. Generally, the effect declines but persists as terrorist attacks become stale information. (JEL F31, F37)

  March 25, 2017   doi: 10.1111/ecin.12447   open full text
• Does Limited Punishment Limit The Scope For Cross Retaliation?
  Richard Chisik, Harun Onder.
  Economic Inquiry. March 15, 2017
  This paper analyzes two prominent institutional rules in the international trading system: a limited cross‐retaliation rule characterized by the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU) Article 22.3 and a limited punishment rule characterized by the General Agreement on Tariffs and Trade (GATT) Article XXVIII. In general, both rules are designed to limit the countermeasures upon a violation; however, the former rule specifies the limits of composition in retaliation, whereas the latter one designates the limits of retaliation magnitude. We show that, albeit seemingly unrelated, the limited cross‐retaliation rule complements the limited punishment rule in permitting greater trade liberalization. Specifically, we show how the limited cross‐retaliation rule also helps limit the incentives to violate the trade agreement when the limited punishment rule prevails. (JEL F13, K33, C73)

  March 15, 2017   doi: 10.1111/ecin.12431   open full text
• The Effects Of Macroeconomic Conditions At Graduation On Overeducation.
  Fraser Summerfield, Ioannis Theodossiou.
  Economic Inquiry. March 03, 2017
  This article shows that unfavorable economic conditions at graduation decrease the likelihood of a good job‐worker match over a worker's subsequent career. Mismatch is quantified in terms of overeducation by both industry and occupation. The German Socio‐Economic Panel and region‐level unemployment rates from 1994 to 2012 are used. Instrumental variables estimates account for endogenous graduation timing. A single percentage point increase in regional unemployment causes an increase in the probability of overeducation of 1.6–1.7 percentage points for university graduates. Effects for technical tertiary education and apprenticeship graduates are smaller. Labor market entry conditions affect workers for up to 9 years after graduation. (JEL J23, J22, E32, I23)

  March 03, 2017   doi: 10.1111/ecin.12446   open full text
• Affirmative Action And Dynamics Of Work‐Ethic Preferences.
  Rezina Sultana.
  Economic Inquiry. March 03, 2017
  This study examines the cultural‐transmission effects of compensatory‐discrimination affirmative action policies on work‐ethic preference dynamics for a population in a caste‐based segregated economy in which some high‐paid jobs are reserved for historically disadvantaged lower‐caste individuals. Cultural attitudes toward preferences for work‐loving and leisure‐loving traits evolve endogenously. The compensatory‐discrimination policies affect differently the preference dynamics for insiders (entitled to employment quota) and outsiders (not entitled to employment quota). Efficient and inefficient equilibria are possible, with larger or smaller proportions of individuals with a work ethic among the insider and outsider populations. The model shows that the commonly conceived conclusion that a job reservation policy benefits a disadvantaged group at the cost of efficiency and economic growth is not a necessary outcome. (JEL A12, C62, J71)

  March 03, 2017   doi: 10.1111/ecin.12443   open full text
• Information And Endogenous Delegation In A Rent‐Seeking Contest.
  Lambert Schoonbeek.
  Economic Inquiry. March 02, 2017
  We offer a new explanation for the occurrence of delegation in rent‐seeking contests. We consider a two‐player contest for a prize of common value. The players only know that the prize is high or low, with given probabilities. Each player can hire a delegate to act on his behalf. After a delegate is hired, she privately observes the true value of the prize. We derive the conditions under which, respectively, no player, only one player, or both players delegate in equilibrium. (JEL D7)

  March 02, 2017   doi: 10.1111/ecin.12444   open full text
• Statehood Experience, Legal Traditions, And Climate Change Policies.
  James B. Ang, Per G. Fredriksson.
  Economic Inquiry. March 02, 2017
  This study investigates how the implementation of modern climate change policies is related to former colonies' length of state history and their legal heritage. We argue that countries with longer statehood experience around the time of colonization were better equipped to implement the legal philosophies transplanted by their colonial powers. Therefore, the implications of receiving British common law versus French civil law should be particularly important in countries with a greater accumulated history of statehood. Using a cross‐section of up to 78 former colonies, our results provide support for this hypothesis. In particular, our estimates demonstrate that common law countries have weaker modern climate change policies than civil law countries and the difference is inflated by a longer statehood experience, measured by the length of state history from 1 to 1800 AD. Legal origin has no effect in areas which, by the time of colonization, had no statehood experience. Finally, we report similar results for the pattern of labor market regulations. (JEL K15, K31, K32, O44, Q54, Q58)

  March 02, 2017   doi: 10.1111/ecin.12441   open full text
• Does Corruption Attenuate The Effect Of Red Tape On Exports?
  Reshad N. Ahsan.
  Economic Inquiry. March 01, 2017
  I use firm ‐level data to examine whether corruption attenuates the adverse effects of red tape on exports. I find that, conditional on there being customs‐related red tape, a firm is better off if it can use bribes to lower the delay that it faces. However, I also find that corruption has a negative overall effect on a firm's decision to export. That is, corruption prevents some firms from entering the export market. These results suggest that to gauge the overall effect of corruption, we must compare its red‐tape attenuating effect with its adverse effect on a firm's decision to export. (JEL F10, F14, K42)

  March 01, 2017   doi: 10.1111/ecin.12445   open full text
• The Effect Of Insurance Coverage On Preventive Care.
  Marika Cabral, Mark R. Cullen.
  Economic Inquiry. March 01, 2017
  Despite the growth in health insurance products that differentially cover preventive care and nonpreventive care, little is known about how preventive care utilization responds to targeted changes in coverage. Using administrative data from a large company, this paper examines the implementation of an insurance benefit design which differentially increased the price of nonpreventive care while decreasing the price of prevention. Leveraging a difference‐in‐differences research strategy, we find that preventive care utilization did not increase and even declined due to the differential price change. This evidence indicates a meaningful negative cross‐price effect, suggesting that nonpreventive care and preventive care are complements. (JEL I13, I11)

  March 01, 2017   doi: 10.1111/ecin.12442   open full text
• Capacity Constrained Exporters: Identifying Increasing Marginal Cost.
  JaeBin Ahn, Alexander F. McQuoid.
  Economic Inquiry. February 28, 2017
  This study revisits a central assumption of standard trade models: constant marginal cost technology. The presence of increasing marginal costs for exporters introduces significant market interdependence across borders missing from traditional models of international trade that rely on constant marginal cost technology. Such market interdependence represents an additional channel through which local shocks are transmitted globally. To identify increasing marginal cost at the level of the firm, we build in flexible production assumptions that nest increasing, decreasing, and constant marginal cost technology to an otherwise standard international trade model. We derive an estimating equation that can be taken directly to the data. Our structural equation explicitly guides our inference on the shape of the marginal cost curve from estimated coefficients. The results suggest that increasing marginal cost is predominant at the firm level. Moreover, utilizing plant‐level information on physical and financial capacity constraints, we find that the degree of increasing marginal cost is significantly exacerbated by both types of constraints. The evidence suggests that access to larger markets through greater international integration may not have the expected welfare gains typically predicted in standard models. (JEL F12, F14)

  February 28, 2017   doi: 10.1111/ecin.12429   open full text
• Patent Breadth In An International Setting.
  Eric W. Bond, Ben Zissimos.
  Economic Inquiry. February 27, 2017
  We examine the Nash equilibria of a game where two national governments set patent breadth strategically. Broader patents make R&D more attractive, but the effect on static efficiency is nonmonotonic. In a North–South model, where only the North can innovate, harmonization of patent breadth lowers welfare relative to the Nash equilibrium. When both countries can innovate, harmonization toward narrower patent breadth may raise world welfare. (JEL F02, F13, O3, O31, O32)

  February 27, 2017   doi: 10.1111/ecin.12440   open full text
• Networks And Selection In International Migration To Spain.
  Nina Neubecker, Marcel Smolka, Anne Steinbacher.
  Economic Inquiry. February 24, 2017
  We offer fresh evidence on the effect of migrant networks on two essential aspects of migration: (1) the total scale of migration and (2) the skill composition of migration. Our analysis is for the remarkable case of Spain, which experienced a full‐blown immigration boom from the mid‐1990s up to the Global Financial Crisis. To accommodate flexible substitution patterns across alternative migrant destinations, we use a three‐level nested multinomial logit model. We find a strong positive network effect on the scale of migration and a strong negative effect on the ratio of high‐skilled to low‐skilled migrants. Simplifying restrictions on the structure of cross‐destination substitutability are rejected by the data. (JEL F22, J61)

  February 24, 2017   doi: 10.1111/ecin.12427   open full text
• Can Guest Workers Solve Japan's Fiscal Problems?
  Selahattin İmrohoroğlu, Sagiri Kitao, Tomoaki Yamada.
  Economic Inquiry. February 22, 2017
  The labor force in Japan is projected to fall from 64 million in 2014 to 20 million in 2100, signaling unprecedented tax/transfer adjustments to achieve fiscal sustainability. In this paper, we develop a quantitative overlapping generations model to measure the impact of guest worker programs in Japan. Against a baseline general equilibrium transition in which the consumption tax adjusts to achieve fiscal sustainability, we compute alternative transitions with guest worker programs. Depending on the size and skill distribution of guest workers, these programs may mitigate Japan's fiscal imbalance problem with a relatively manageable increase in the consumption tax. (JEL E2, E6, H5, J11, J15)

  February 22, 2017   doi: 10.1111/ecin.12439   open full text
• Immigration, Skill Heterogeneity, And Qualification Mismatch.
  Xiangbo Liu, Theodore Palivos, Xiaomeng Zhang.
  Economic Inquiry. February 22, 2017
  We investigate the effects of U.S. immigration in a comprehensive search and matching framework that allows for skill heterogeneity, imperfect substitutability between skilled and unskilled inputs, different search cost between natives and immigrants, cross‐skill matching, and imperfect transferability of foreign human capital. When we simulate the effects of the U.S. immigration that took place between the years 2000 and 2009, we find that both skilled and unskilled natives, as well as skilled and unskilled immigrants, gain in terms of income and employment. We also investigate the effects of an improvement in the transferability of human capital across borders and find that, although it has some redistributive effects, overall it benefits both immigrants and natives. (JEL F22, J61, J64)

  February 22, 2017   doi: 10.1111/ecin.12434   open full text
• The Effects Of Foreign Universities On Domestic Human Capital Accumulation.
  Xu Xu, Kevin Sylwester.
  Economic Inquiry. February 20, 2017
  This article considers the effects upon human capital in a host country when foreign universities open branches within this country. We create a model where aspiring students differ according to inherent ability and choose endogenously how much time to devote to preparing to win admittance to a university. Universities can either be domestic or foreign, and payoffs for the student differ between them. The presence of these foreign universities can potentially increase effort—and so human capital—by providing more incentive to study. However, they can also lead to brain drain as students could be more likely to emigrate upon graduation relative to those who attend a domestic university. We apply this model to China and use parameter values in simulations to assess to what extent inflow of foreign universities provide benefits to China. (JEL D82, I23, I25)

  February 20, 2017   doi: 10.1111/ecin.12436   open full text
• Labor Market Dynamics With Search Frictions And Fair Wage Considerations.
  Pei Kuang, Tong Wang.
  Economic Inquiry. February 17, 2017
  Fairness considerations in wage setting can improve the ability of the Diamond‐Mortensen‐Pissarides search and matching model to account for U.S. labor market dynamics. Firms' production is influenced by workers' effort input, which depends on whether workers consider the employment relation as fair. A typical worker's effort is determined in a comparison of individual current wage with wage norms, including the outside option, the individual past wage, and the wage level in the steady state. The fairness considerations in the search framework give rise to endogenous real wage rigidity, and realistic volatilities of unemployment, vacancies, and labor market tightness. (JEL E24, E32, J64)

  February 17, 2017   doi: 10.1111/ecin.12428   open full text
• Personality, Information Acquisition, And Choice Under Uncertainty: An Experimental Study.
  Guillaume R. Fréchette, Andrew Schotter, Isabel Trevino.
  Economic Inquiry. February 15, 2017
  This article studies the role of personality in choice under risk and uncertainty. We explore the hypothesis that personality plays a role in decision making in situations of uncertainty but not in situations of risk. In addition to offering support for this main hypothesis, we explore the various pathways through which personality exerts its influence. What we find is that in uncertain environments, where decision makers are able to acquire information about the unknown probability distributions they face, personality variables influence the type of information people acquire, which then influences their choice. Our experimental design brings in two novel aspects of choice under uncertainty: information acquisition and advice. The findings indicate that indeed, under uncertainty, personality matters for choice in a way it does not under risk. Furthermore, the results suggest that personality can play a role at multiple levels, such as people's preferences for certain types of information and the likelihood of following advice. (JEL C90, D03, D81)

  February 15, 2017   doi: 10.1111/ecin.12438   open full text
• Monetary Policy Rules Under Heterogeneous Inflation Expectations.
  Sophocles N. Brissimis, Nicholas S. Magginas.
  Economic Inquiry. February 15, 2017
  This paper evaluates the role of inflation‐forecast heterogeneity in U.S. monetary policymaking. The deviation between private and central bank inflation forecasts is identified as a significant explanatory factor behind the Fed's monetary policy decisions. A discretionary policy rule that includes the forecast deviation as an additional argument is estimated empirically for the period 1975–2009, covering the chairmanships of Arthur Burns, George Miller, Paul Volcker, Alan Greenspan, and the beginning of Ben Bernanke's term, by using inflation forecasts obtained from the Federal Open Market Committee's Greenbook and the Survey of Professional Forecasters and real‐time estimates of the output gap. The estimated rule appears to provide a consistent description of the Fed's policy during the sample period presenting an alternative perspective regarding the key drivers of the high‐inflation phase in the 1970s as well as of the successful Volcker disinflation in the early 1980s and the gradual transition to a regime of lower inflation and high policy credibility that has increasingly characterized monetary policy over the past two decades. (JEL E50, E52, E58)

  February 15, 2017   doi: 10.1111/ecin.12435   open full text
• Money And Product Quality Under Asymmetric Information.
  Tao Peng.
  Economic Inquiry. February 15, 2017
  This article examines the effects of money on product quality, as well as the price pattern of heterogeneous quality goods, in a search‐theoretical monetary model with divisible money and divisible commodities. We establish the existence and uniqueness/multiplicity of monetary equilibrium in several different cases. The steady‐state equilibrium of our model displays several properties that are absent or distinct from those of previous studies. In particular, we find that under egalitarian bargaining, the Friedman rule cannot achieve socially efficient allocation due to asymmetric information. We find that the price of informed high‐quality goods is higher than the price of uninformed quality goods. We also find that an increase in inflation can improve product quality. (JEL E40)

  February 15, 2017   doi: 10.1111/ecin.12432   open full text
• Peer Pressure: Experimental Evidence From Restroom Behavior.
  Bruno Cardinale Lagomarsino, Matías Gutman, Lucía Freira, María Laura Lanzalot, Maximiliano Lauletta, Leandro E. Malchik, Felipe Montaño Campos, Bianca Pacini, Martín A. Rossi, Christian Valencia.
  Economic Inquiry. February 14, 2017
  We provide experimental evidence on the effect of peer pressure on individual behavior. Specifically, we study the effect of being exposed to an observer in a public restroom on handwashing and urinal flushing behavior. Our estimates show that being exposed to an observer increases the probability of handwashing by 13 percentage points and the probability of urinal flushing by 15 percentage points. Given that handwashing and urinal flushing have social benefits that exceed individual benefits, our findings provide support for peer pressure as an additional way of addressing the social suboptimality arising from externalities. (JEL C91, C93)

  February 14, 2017   doi: 10.1111/ecin.12437   open full text
• Are Migrants More Productive Than Stayers? Some Evidence From A Set Of Highly Productive Academic Economists.
  Pedro Albarrán, Raquel Carrasco, Javier Ruiz‐Castillo.
  Economic Inquiry. February 14, 2017
  This article compares the average productivity of migrants (who work in a country different from their country of origin) and stayers (whose entire academic career takes place in their country of origin) in a set of 2,530 highly productive economists that work in 2007 in a selection of the top 81 Economics departments worldwide. The main findings are the following two. First, productivity comparisons depend on the cohort and the type of department. For example, in the top U.S. departments, foreigners are more productive than stayers only among older individuals; in the bottom U.S. departments, this is the case for both cohorts, while in the other countries the productivity of foreigners and stayers is indistinguishable for both cohorts. Second, when we restrict our attention to an elite consisting of economists with above average productivity, all productivity differences between migrants and stayers in the United States vanish. As our analysis depends on observational data in which the migration decision is not exogenously identified, our estimates have a descriptive rather than a causal interpretation. However, our results are very robust to the treatment of the elite, the partition into several department categories, and the definition of the cohorts and the productivity notion. (JEL J61)

  February 14, 2017   doi: 10.1111/ecin.12430   open full text
• Reform Support In Times Of Crisis: The Role Of Family Ties.
  Elias Brumm, Johannes Brumm.
  Economic Inquiry. February 14, 2017
  We argue that an important determinant of voters' support for economic reform is the strength of family ties. While the “crisis hypothesis” predicts that crises facilitate reform, we show in a political economy model that this relation can break down, and even reverse, when agents take into account the effect of reform on their family members. Applied to southern European countries with strong family ties, the model rationalizes why the extremely high (youth) unemployment following the Great Recession has not led to more substantial labor market reforms. In such countries austerity might block rather than foster additional structural reforms. (JEL D64, D72, J48)

  February 14, 2017   doi: 10.1111/ecin.12426   open full text
• Effects Of Welfare Reform On Women's Voting Participation.
  Hope Corman, Dhaval Dave, Nancy E. Reichman.
  Economic Inquiry. February 13, 2017
  This study investigates the effects of welfare reform in the United States in the 1990s on voting among low‐income women. Using the November Current Population Surveys with the added Voting and Registration Supplement for the years 1990 through 2004 and exploiting changes in welfare policy across states and over time, we estimate the causal effects of welfare reform on women's voting registration and voting participation during the period in which welfare reform unfolded. During this time period, voter turnout was decreasing in the United States. We find robust evidence that welfare reform led to smaller declines in voting (about 3 to 4 percentage points, which translates to about 10% relative to the baseline mean) for women who were exposed to welfare reform compared to several different comparison groups of similar women who were much less exposed. The robust findings suggest that welfare reform had prosocial effects on civic participation, as characterized by voting. The effects were largely confined to presidential elections, were stronger in Democratic than Republican states, were stronger in states with stronger work incentive policies, and appeared to operate through employment, education, and income. (JEL D72, H53, I38, J21)

  February 13, 2017   doi: 10.1111/ecin.12433   open full text
• Limited Asset Market Participation, Sticky Wages, And Monetary Policy.
  Guido Ascari, Andrea Colciago, Lorenza Rossi.
  Economic Inquiry. December 22, 2016
  A small amount of nominal wage stickiness makes limited asset market participation (LAMP) irrelevant for the design of monetary policy. Recent research argues that LAMP could invert the slope of the IS curve in otherwise standard New Keynesian models. This, in turn, implies that optimal monetary policy rules should be passive. We show that the so‐called inverted aggregate demand logic (IADL) relies on nominal wage flexibility. Outside of extreme parameterizations, wage stickiness prevents the inversion of the slope of the IS curve. Hence, LAMP does not generally alter the trade‐offs faced by a welfare maximizing Central Bank, and for this reason it does not fundamentally affect the design of optimal simple rules and optimal monetary policy. (JEL E21, E52)

  December 22, 2016   doi: 10.1111/ecin.12424   open full text
• Efficient Tax Reporting: The Effects Of Taxpayer Liability Information Services.
  Christian A. Vossler, Michael McKee.
  Economic Inquiry. December 20, 2016
  The complexity of the individual income tax system can give rise to both under‐ and overreporting of liability, thus creating a wedge between taxpayer perceptions of the price of public services and their actual cost, and potentially leading to budget misallocations and associated efficiency losses. This study uses theory and experiments to evaluate the effectiveness of taxpayer service programs that endeavor to resolve uncertainty over tax liability. To do so, we induce uncertainty over tax liability and investigate the effects of both service accuracy and reliability. We find participants are less likely to file when tax liability is uncertain but the provision of information offsets this effect; furthermore, it appears that simply providing a service, even one that imperfectly reveals liability, increases the propensity to file and the accuracy of the filing. When a service that promises to resolve uncertainty completely is requested but not delivered, the result is underreporting even more severe than in a setting where no service is available. (JEL H2, H26, C91)

  December 20, 2016   doi: 10.1111/ecin.12425   open full text
• Dimensions Of Macroeconomic Uncertainty: A Common Factor Analysis.
  Steffen R. Henzel, Malte Rengel.
  Economic Inquiry. November 30, 2016
  Uncertainty about the future course of the economy is a potential driver of aggregate fluctuations. To identify the distinct dimensions of uncertainty in the macroeconomy, we construct a large dataset covering all types of economic uncertainty. We then identify two fundamental factors that account for the common dynamics in this dataset. These factors are interpreted as macroeconomic uncertainty. The first factor captures business cycle uncertainty, while the second factor represents oil and commodity price uncertainty. While both types of uncertainty generate a decline in output, time‐varying oil and commodity price uncertainty is more important for fluctuations in real activity. However, nonlinearities seem to amplify the effect of business cycle uncertainty during the global financial crisis. (JEL C32, C38, E32)

  November 30, 2016   doi: 10.1111/ecin.12422   open full text
• College Advising And Gender.
  Shane Thompson.
  Economic Inquiry. November 29, 2016
  This paper uses a field experiment to identify college advising gender biases. Five hundred and thirty surveys are randomized over a national sample of practicing advisors such that student gender is the “treatment” of the experiment. I find that advisors discount the ability of female students relative to males by statistically significant magnitudes in both mathematics and English. Additionally, male advisors recommend mathematics with much greater likelihood than do female advisors. (JEL I2, J16)

  November 29, 2016   doi: 10.1111/ecin.12421   open full text
• Liquidity Risk And Time‐Varying Correlation Between Equity And Currency Returns.
  Kuk Mo Jung.
  Economic Inquiry. November 17, 2016
  Using the data of 20 major Organization for Economic Co‐operation and Development countries over time, this article documents new evidence on real equity and real currency prices: higher real returns in the home equity market relative to its foreign counterparts are generally associated with real home currency depreciation at monthly frequency, but this negative correlation breaks down or even reverses during times of relatively higher aggregate economic uncertainty or volatility. This article also argues that a long‐run risks‐type model with time‐varying liquidity risk in stock markets can provide one plausible explanation for the time‐varying correlation structure. (JEL E43, F31, G12, G15)

  November 17, 2016   doi: 10.1111/ecin.12418   open full text
• Intermediate Information, Loss Aversion, And Effort: Empirical Evidence.
  Sandra Schneemann, Christian Deutscher.
  Economic Inquiry. November 16, 2016
  The present article empirically explores the impact of intermediate information on contestants' effort. Data involving substituted soccer players of the German Bundesliga indicate only weak evidence of a negative effect of ex ante heterogeneity on effort; in contrast, intermediate information, measured by goal difference at the time of substitution, significantly affects effort. Players exert the greatest effort when their team is leading by one goal and reduce their effort when it is trailing. When intermediate information suggests the contest is already decided, players from both teams reduce effort. This behavior is in line with loss aversion, such that players weight potential losses more than potential gains and adjust their effort accordingly. (JEL Z22, J41, M54)

  November 16, 2016   doi: 10.1111/ecin.12420   open full text
• The Payoff To Consistency In Performance.
  Christian Deutscher, Oliver Gürtler, Joachim Prinz, Daniel Weimar.
  Economic Inquiry. November 11, 2016
  This study investigates whether firms are willing to pay higher wages to workers who demonstrate consistent performance than to those whose performance is more volatile. A formal model reflects a production technology view, assuming the law of diminishing marginal product. This model suggests that a more consistent worker produces higher expected output and therefore receives a higher wage. The test of the model uses data from the National Basketball Association. The empirical data support the model: Players whose performances were more consistent than the performances of other players received higher wages on average. (JEL D41, J31, M52, Z20)

  November 11, 2016   doi: 10.1111/ecin.12415   open full text
• Does Television Entry Decrease The Number Of Movie Theaters?
  Ricard Gil, Fernanda Gutierrez‐Navratil.
  Economic Inquiry. November 11, 2016
  This paper empirically examines the impact of competition in the television (TV) industry on the number of movie theaters, their attendance, and their box office revenues. Studies of firm entry usually focus on the impact of regulation on economic outcomes within an industry, thereby neglecting its impact on neighboring industries. Using changes in regulation in the Spanish local TV station industry, we estimate the impact of TV entry on the movie theater industry between 1993 and 2005. Our findings show that local TV entry decreased the number of theaters and screens in a province, as well as movie attendance and box office revenues. (JEL L11, L43, L82)

  November 11, 2016   doi: 10.1111/ecin.12414   open full text
• Warm‐Glow Giving: Earned Money And The Option To Take.
  Andrew Luccasen, Philip J. Grossman.
  Economic Inquiry. November 11, 2016
  Giving in dictator games has been shown to vary with the nature of the endowment (earned vs. house money) and the action space (give only vs. the option to give or take). This article is the first to test if these factors similarly affect warm‐glow giving alone. There is no reason that one would expect the same outcomes given that the motivations for warm‐glow giving are different from the motivations for total (warm‐glow plus purely altruistic) giving. We find that warm‐glow giving to charity or philanthropic institutions in a real‐donation experiment increases when the endowment is earned. The option to take does reduce warm‐glow giving to charity, but significant giving remains. Our results suggest that donating earned income creates greater utility than donating an equal amount from a windfall gain, and that warm glow comes not merely from the act of giving, but also from the characteristics of the recipient. (JEL C90, D64, H41)

  November 11, 2016   doi: 10.1111/ecin.12417   open full text
• Electric And Plug‐In Hybrid Vehicle Demand: Lessons For An Emerging Market.
  Tamara L. Sheldon, J. R. DeShazo, Richard T. Carson.
  Economic Inquiry. November 10, 2016
  Understanding demand in the new plug‐in hybrid electric vehicle (PHEV) market is critical to designing more effective adoption policies. We use stated preference data from an innovative choice experiment to estimate demand for PHEVs relative to battery electric vehicles (BEVs) and to explore heterogeneity in demand for these vehicles. We find the gap between willingness to pay for PHEVs and their price premium over conventional vehicles is on the order of current subsidies, while that of BEVs is an order of magnitude larger. We use a latent class model to show PHEVs draw a different consumer segment into the market. (JEL Q5, R41)

  November 10, 2016   doi: 10.1111/ecin.12416   open full text
• The Timing Of Welfare Payments And Intimate Partner Violence.
  Lin‐Chi Hsu.
  Economic Inquiry. October 21, 2016
  I examine transfer schedules for the Temporary Assistance for Needy Families (TANF) program and find a causal relationship between the time directly after welfare payments and intimate partner violence against women. This study supports the hypothesis that the husband uses threats of violence as an instrument to gain control over the allocation of household resources, and suggests that the increased incidence in physical violence after welfare payments is associated with alcohol use. Additionally, I find that states that pay TANF recipients twice a month do not have this effect on threats of violence. This suggests that smaller, more frequent payments may reduce the husband's incentive to use verbal violence as a bargaining tool. (JEL I38, J18, J12)

  October 21, 2016   doi: 10.1111/ecin.12413   open full text
• Brides For Sale: Cross‐Border Marriages And Female Immigration.
  Daiji Kawaguchi, Soohyung Lee.
  Economic Inquiry. October 19, 2016
  Developed East Asian countries import a large number of women from abroad as brides every year, although such cross‐border marriages virtually did not exist 20 years ago. With a theoretical framework and empirical evidence, we argue that developed Asian countries' demand for foreign brides is the consequence of improvement in women's economic status and gender‐discriminative household arrangements that insufficiently incorporate women's improved status in marriage. We offer sets of empirical evidence in line with our argument, using various macro‐ and microlevel datasets. (JEL A12, J12, J61)

  October 19, 2016   doi: 10.1111/ecin.12411   open full text
• Why Zero Tolerance Of Misconduct Is Undesirable In Contests.
  Scott M. Gilpatric, Cristina M. Reiser.
  Economic Inquiry. October 19, 2016
  Competition can foster misconduct in any circumstance where the organizer of a contest cannot perfectly monitor contestants' actions or when doing so is prohibitively costly. Although misconduct comprises all actions that are contrary to the interest of the organizer, it is not necessarily the case that it is optimal to prohibit all such behavior. In this paper, we determine the equilibrium level of misconduct chosen by players in a symmetric rank‐order tournament between two competitors in which the organizer tolerates some level of misconduct. In addition to showing that zero tolerance may not minimize the level of misconduct in equilibrium, we show that there exists a range of tolerated misconduct where a symmetric mixed strategy equilibrium exists with players cheating (i.e., misconduct above the tolerated level) with some probability. When the gain from misconduct is uncertain and unknown the contest organizer faces a tradeoff: tolerating more misconduct will reduce such behavior when the state of temptation is high, but increase it when temptation is low. (JEL J33, K42)

  October 19, 2016   doi: 10.1111/ecin.12410   open full text
• Endowments, Perceived Similarity, And Dictator Giving.
  Sebastian J. Goerg, David B. Johnson, Jonathan D. Rogers.
  Economic Inquiry. October 19, 2016
  A common assumption of money is that it is fungible. An implication of this assumption is that the source of money does not affect economic decision making. We find evidence contradicting this fungibility assumption. Specifically, we explore how the perception of an endowment source influences amounts sent in a dictator game. We find perceived similarity to the endowment provider to be negatively correlated with dictator offers. Dictators who consider themselves relatively more similar to their endowment provider send significantly smaller amounts to their partners. Our results demonstrate that economic decision making can be influenced by the provider of income shocks. (JEL C78, C91, C99, D31, D64, D74)

  October 19, 2016   doi: 10.1111/ecin.12408   open full text
• Labor Supply Estimation Biases From Disregarding Nonwage Benefits.
  Matthew D. Baird.
  Economic Inquiry. October 13, 2016
  Labor supply models and research underpinned by labor supply decisions often assume that workers' choices are functions of wage and wage offers. However, the literature shows evidence that such decisions at least partly depend on nonwage benefits encompassed in jobs and occupations. In this paper, I develop and estimate a stochastic dynamic model of occupation and job choice, where nonwage benefits are directly incorporated into the decision alongside wages (a full model). Nested within the full model is a wage model, which represents the common practice in the literature of basing selection solely on wages and disregarding nonwage benefits. I separately estimate the full model and the nested wage model to compare the implications (biases) of omitting nonwage benefits. I compare the two models' estimates of elasticities and an inequality reduction intervention policy. I find that disregarding nonwage benefits generally causes biases. There are cases when the two models predict very similar outcomes and have close estimates, such as in occupation‐specific elasticities and job transition elasticities. But these special cases are products of canceling biases. In most cases, ignoring nonwage benefits will bias estimates by overestimating the importance of wage in the selection process and by disregarding changes in relative prices between wage and nonwage benefits. (JEL J20, J32, D91)

  October 13, 2016   doi: 10.1111/ecin.12405   open full text
• Firms' Expectations About The Impact Of Ai And Robotics: Evidence From A Survey.
  Masayuki Morikawa.
  Economic Inquiry. October 13, 2016
  This study presents new evidence on firms' views about the impact of artificial intelligence (AI) and robotics on their business and employment, using data from an original survey of more than 3,000 Japanese firms. The focus of this study is on technology‐skill complementarity. Firms with highly educated employees tend to expect positive impacts of AI‐related technologies on their business, and vice versa. Larger firms and firms that engage in global markets tend to have positive views about the impacts of AI‐related technologies. (JEL O33, J23, J24, M15)

  October 13, 2016   doi: 10.1111/ecin.12412   open full text
• Soft Skills, Hard Skills, And The Black/White Wage Gap.
  C. Simon Fan, Xiangdong Wei, Junsen Zhang.
  Economic Inquiry. October 12, 2016
  This study examines the relative importance of soft skills versus hard skills across occupations and its impact on the observed wage gap between Blacks and Whites in the United States. It posits that the Black/White pay gap may vary across occupations that require the use of different types of skills. We classify occupations into hard‐skill intensive versus soft‐skill intensive jobs using the skill content measures of different occupations from the Occupational Information Network (O*Net). We then use data from the National Longitudinal Survey of Youth (NLSY) and Current Population Survey (CPS) to investigate the impact of job skill type on the wage gap. Consistent with our theoretical predictions, we show that this wage gap in white‐collar jobs is smaller for hard‐skills jobs than it is for soft‐skills jobs. Moreover, we demonstrate that, in response to variations in the wage gap across different occupations, Blacks are more likely to self‐select themselves into hard‐skills jobs, ceteris paribus. This shows not only that discrimination against Blacks varies across occupations, but also that such discrimination induces the self‐selection of Blacks into certain occupations. Moreover, this finding highlights the role played by co‐worker/customer discrimination in explaining the racial wage gap in the U.S. labor market. (JEL J15, J31)

  October 12, 2016   doi: 10.1111/ecin.12406   open full text
• On The Desirability Of Tax Coordination When Countries Compete In Taxes And Infrastructure.
  Yutao Han, Patrice Pieretti, Benteng Zou.
  Economic Inquiry. October 12, 2016
  This article contains two distinct messages. First, when jurisdictions compete in two independent strategic variables, the decision to coordinate on one variable (a tax rate) induces a carry‐over effect on the unconstrained instrument (infrastructure expenditures). Consequently, classical results of the tax coordination literature may be qualified. A second message is that the relative flexibility of the strategic instruments, which may depend on the time horizon of the decision making, does matter. In particular, tax coordination is more likely to be detrimental (in terms of revenue and/or welfare) when countries can compete simultaneously in taxes and infrastructure, rather than sequentially. The reason is that simultaneity eliminates strategic effects between tax and nontax instruments. (JEL H21, H87, H73, F21, C72)

  October 12, 2016   doi: 10.1111/ecin.12407   open full text
• Telework: Urban Form, Energy Consumption, And Greenhouse Gas Implications.
  William Larson, Weihua Zhao.
  Economic Inquiry. October 08, 2016
  A primary motivation of telework policy is to reduce energy consumption and greenhouse gas emissions. Using a numerical simulation of the standard urban model, we show telework causes sprawl, calling into question the idea that telework decreases energy consumption. Overall effects depend on wage changes due to telework, land‐use regulation such as height limits or greenbelts, and the telework participation rate. While energy consumption increases in some scenarios, emissions may fall due to changes in the energy mix between gasoline and other sources. (JEL R11, R28, C60)

  October 08, 2016   doi: 10.1111/ecin.12399   open full text
• Pitfalls In Testing For Cointegration Between Inequality And The Real Income.
  Ghislain N. Gueye, Hyeongwoo Kim, Gilad Sorek.
  Economic Inquiry. October 03, 2016
  Frank (2009) constructed a comprehensive panel of state‐level income inequality measures using individual tax filing data from the Internal Revenue Service. Employing an array of cointegration exercises for the data, he reported a positive long‐run relationship between income inequality and the real income per capita in the United States. This article questions the validity of his findings. First, we suggest a misspecification problem in his approach regarding the order of integration in the inequality index, which shows evidence of nonstationarity only for the post‐1980 data. Second, we demonstrate that his findings are not reliable because the panel cointegration test he used requires cross‐section independence, which is inappropriate for the U.S. state‐level data. Employing panel tests that allow cross‐section dependence, we find no evidence of cointegration between inequality and the real income. (JEL D31, O40)

  October 03, 2016   doi: 10.1111/ecin.12398   open full text
• Market Entry Mode: Evidence From The Golden Age Of Hollywood.
  Benjamin Bridgman.
  Economic Inquiry. September 30, 2016
  I examine international market entry modal choice using novel data sources on the early years of the U.S. motion picture industry. These data detail how studios built out their international distribution networks and give unusual access to revenues generated across modes. Motion picture exporters used a variety of entry modes: exports, licensed agents, and offices. Studios opened offices in distant, large markets first and used these markets as platforms to build out their distribution network. This pattern indicates that directed search for export customers is important. Offices generated more total revenue than licensed agents. They allowed headquarters to monitor employees through strict control of financial assets, limiting the diversion of intellectual property. (JEL F14, F21, L22, L24, L82)

  September 30, 2016   doi: 10.1111/ecin.12397   open full text
• Sentiment Bias And Asset Prices: Evidence From Sports Betting Markets And Social Media.
  Arne Feddersen, Brad R. Humphreys, Brian P. Soebbing.
  Economic Inquiry. September 30, 2016
  Previous research using attendance‐based proxies for sentiment bias in sports betting markets confirmed the presence of investor sentiment in these markets. We use data from social media (Facebook “Likes”) to proxy for sentiment bias and analyze variation in bookmakers' prices investor sentiment. Based on betting data from seven professional sports leagues in Europe and North America, we find evidence that bookmakers increase prices for bets on teams with relatively more Facebook “Likes,” indicating the presence of price‐insensitive investors with sentiment bias. These price changes do not affect informational efficiency in this market. (JEL L81, G14)

  September 30, 2016   doi: 10.1111/ecin.12404   open full text
• Policy Changes In Major League Baseball: Improved Agent Behavior And Ancillary Productivity Outcomes.
  Brian M. Mills.
  Economic Inquiry. September 22, 2016
  Offense in Major League Baseball (MLB) has decreased substantially since 2006, often attributed to increased testing and punitive action for use of performance enhancing drugs. However, there has been concurrent policy change affecting behavior of other league agents that may have also affected game play. I therefore examine the effect of these agents, MLB umpires, on offensive production in baseball. Estimates reveal that a substantial portion of the offensive reduction from 2008 through 2014 can be attributed to changes in the size of the strike zone. Implications are further discussed in the context of firm production relevant outcomes as they relate to the labor force and supervisor performance expectations. (JEL J44, Z22, Z28, L25)

  September 22, 2016   doi: 10.1111/ecin.12396   open full text
• Party Affiliation And Public Spending: Evidence From U.S. Governors.
  Louis‐Philippe Beland, Sara Oloomi.
  Economic Inquiry. September 20, 2016
  This paper investigates whether the party affiliation of governors (Democrat or Republican) has an impact on the allocation of state expenditures. Exploiting gubernatorial election results from 1960 to 2012 and a Regression Discontinuity Design (RDD), we find that Democratic governors allocate a larger share of their budget to health/hospitals and education sectors. We find no significant impact of the political party of governors on total spending, only on the allocation of funds. The results are robust to a wide range of controls and model specifications. (JEL D72, H75, H72)

  September 20, 2016   doi: 10.1111/ecin.12393   open full text
• Funding Forms, Market Conditions, And Dynamic Effects Of Government R&D Subsidies: Evidence From China.
  Di Guo, Yan Guo, Kun Jiang.
  Economic Inquiry. September 12, 2016
  We examine various factors that influence the effects of government‐subsidized research and development (R&D) programs on firm productivity. Based on a panel dataset of Chinese firms, we find the effects of the Innovation Fund for Small and Medium Technology Based Firms (Innofund) are dynamic over time and are heterogeneous depending on funding forms and the level of marketization and economic development across regions. In general, Innfound has significant and positive effects on firm productivity in both the short and long run. However, the short‐term effects of Innofund are stronger than the long‐term ones. Additionally, the positive effects of Innofund are stronger for firms backed by interest‐free bank loans than those supported by appropriation. Meanwhile, Innofund has stronger positive effects in provinces that are less market‐oriented or less developed economically. Finally, the short‐term effects of Innofund stay stronger than the long‐term ones even after we control the funding forms and the market conditions across regions. Identification and selection concerns are addressed through the propensity score matching approach and two‐stage estimation. (JEL G28 O38 H76)

  September 12, 2016   doi: 10.1111/ecin.12395   open full text
• The Employment Effect Of Deregulating Shopping Hours: Evidence From German Food Retailing.
  Mario Bossler, Michael Oberfichtner.
  Economic Inquiry. September 12, 2016
  We study the effect of deregulating weekday shop opening hours on employment in retailing. Using administrative data on all German food shops, a difference‐in‐differences analysis shows that relaxing restrictions on opening hours raised employment by 0.4 workers per shop corresponding to an increase by 4%. This effect is driven by part‐time employment and employment in large shops, and it implies an increase by 0.1 workers per additional actual weekly opening hour. While the wage bill increased by less than employment, the deregulation seems not to have reduced earnings of workers already employed in retailing before the deregulation. (JEL J23, L51, L81)

  September 12, 2016   doi: 10.1111/ecin.12394   open full text
• Nudging Life Insurance Holdings In The Workplace.
  Timothy F. Harris, Aaron Yelowitz.
  Economic Inquiry. September 06, 2016
  Using data from a university, we analyze a policy designed to increase employer‐sponsored life insurance. The university increased basic life insurance holdings, which nudged employees with supplemental coverage to have more life insurance. In large part due to inertia, the nudge increased life insurance holdings one‐for‐one for those who could have undone it. Additionally, we find that expanding coverage options significantly increased total life insurance holdings for new hires who were not subject to inertia. These policy changes reduced uninsured vulnerabilities for two‐thirds of employees. Our findings have important policy implications for addressing widespread disparities in life insurance coverage. (JEL D31, G22, D03, J32, J33, J38, H20)

  September 06, 2016   doi: 10.1111/ecin.12390   open full text
• Entry Barriers, Competition, And Technology Adoption.
  Lei Fang.
  Economic Inquiry. September 06, 2016
  I build a model of technology adoption to study the quantitative effect of entry barriers on total factor productivity (TFP). In my model, incumbent firms choose technologies that are sufficiently productive to deter entry from a potential competitor. I show that higher entry barriers help to deter entry and lead to the choice of less productive technologies. A novelty of my work is that I use a direct measure of entry barriers. I find that reducing entry barriers from their average level in the poorest 30% of countries to their U.S. level leads to a sizeable increase in aggregate TFP of 12%. (JEL O11, O43)

  September 06, 2016   doi: 10.1111/ecin.12391   open full text
• Inducing Overconfidence.
  Francisco Silva.
  Economic Inquiry. August 24, 2016
  In this study, I present a theory which explains how the influence of others may generate overconfidence. The argument is built on the idea that the more help an agent receives when performing a task, the less informative the score on that task will be relative to the agent's ability to perform it. If an agent is confident, he tends to benefit from more cooperation opportunities simply because he is likely to be perceived as being more skilled. As a result, he remains confident because the future signals he will observe will contain very little information regarding his ability. On the contrary, if the agent is not confident, he will receive more informative scores, which will help him learn his true ability faster. (JEL D81, D83, D84)

  August 24, 2016   doi: 10.1111/ecin.12388   open full text
• Employee Financial Literacy And Retirement Plan Behavior: A Case Study.
  Robert Clark, Annamaria Lusardi, Olivia S. Mitchell.
  Economic Inquiry. August 17, 2016
  This article uses administrative data on all active employees of the Federal Reserve (FR) System to examine participation in and contributions to the Thrift Saving Plan, the System's defined contribution (DC) plan. We link to administrative records a unique employee survey of economic/demographic factors including a set of financial literacy questions. Not surprisingly, FR employees are substantially more financially literate than the population at large. Most importantly, financially savvy employees are also most likely to participate in their DC plan. Sophisticated workers contribute three percentage points more of their earnings to the DC plan than do the less knowledgeable, and they hold more equity in their pension accounts. We examine changes in employee plan behavior 1 year after employees completed a Learning Module about retirement planning, and we compare it to baseline patterns. We find that those employees who completed the Learning Module were more likely to start contributing and less likely to have stopped contributing to the DC plan postsurvey. In sum, employer‐provided learning programs are shown to significantly impact employee retirement saving decisions and consistent with a lot of other research, higher levels of financial literacy are found to have a beneficial impact on retirement saving patterns. (JEL J3, H7)

  August 17, 2016   doi: 10.1111/ecin.12389   open full text
• Information Acquisition Under Risky Conditions Across Real And Hypothetical Settings.
  Matthew P. Taylor.
  Economic Inquiry. August 17, 2016
  I collect data on how subjects acquire information about risky choices in both real and hypothetical settings using process‐tracing software called Mouselab. On average, there are no significant differences across settings in the amount of time subjects take to make a choice or the completeness of the information they acquire. Subjects also acquire information in sequences consistent with an integration model of decision‐making, such as expected utility theory or prospect theory. I do not find significant differences in risk preferences across settings, on average, but I do find that subjects' risk preferences are related to the completeness of the information that they acquire and where they start their information acquisition. (JEL C91, D80, D83)

  August 17, 2016   doi: 10.1111/ecin.12386   open full text
• Guilty Conscience And Incentives With Performance Assessment Errors.
  Kyota Eguchi.
  Economic Inquiry. August 17, 2016
  This study examines the effects of guilty conscience on incentive in the situation where an agent performance assessment has errors. There are two types of assessment error: undervaluation and overvaluation. In overvaluation, agents will not correct the assessment because their wages would then decrease. Although agents will want their undervaluation corrected, principals will not correct the error due to increased wage cost. Hence, correcting errors is complicated. However, this type of selfish behavior by agents and principals produces feelings of guilt, particularly when others trust them. In this situation, a high incentive is desirable for conscientious people with a strong sense of guilt or for nonconscientious people who do not feel guilt, but it is undesirable for intermediate‐type people who are conscientious only to a certain extent. (JEL D03, D82, J41)

  August 17, 2016   doi: 10.1111/ecin.12387   open full text
• Measuring And Modeling Intergenerational Links In Relation To Long‐Term Care.
  Andrew Caplin, Mi Luo, Kathleen McGarry.
  Economic Inquiry. August 12, 2016
  Long‐term care has profound intergenerational implications. It can be costly for those who need it and onerous for loved ones who provide it. We pinpoint three intergenerational aspects of long‐term care that require further research. One concerns the link between costs of private care and intergenerational wealth transfers. The second concerns the link between participation in care and the work and welfare of family providers. The third relates to intergenerational tensions that these and other late‐in‐life interactions create. We outline innovations in modeling and measurement that would improve understanding of intergenerational linkages and their implementation in appropriate panel data. (JEL D91, I13, J22)

  August 12, 2016   doi: 10.1111/ecin.12385   open full text
• A Theory Of Turnover And Wage Dynamics.
  Jin Li, Jun Yu.
  Economic Inquiry. August 12, 2016
  We develop a model of turnover and wage dynamics with insurance, match‐specific productivity, and long‐term contracting. The model predicts that wages are downward rigid within firms but can decrease when workers are fired. We apply the model to study the impact of business cycles on subsequent wages and job mobility. Workers hired during a boom have persistent higher future wages if staying with the same firm. However, these boom hires are more likely to be terminated and have shorter employment spells. (JEL C73, D23, D82, J33)

  August 12, 2016   doi: 10.1111/ecin.12384   open full text
• The Optimal Allocation Of Prizes In Tournaments Of Heterogeneous Agents.
  Loukas Balafoutas, E. Glenn Dutcher, Florian Lindner, Dmitry Ryvkin.
  Economic Inquiry. August 10, 2016
  Tournaments are widely used in organizations, explicitly or implicitly, to reward the best‐performing employees, for example, by promotion or bonuses, and/or to penalize the worst‐performing employees, for example, by demotion, withholding bonuses, or unfavorable job assignments. These incentive schemes can be interpreted as various prize allocations based on the employees' relative performance. While the optimal prize allocation in tournaments of symmetric agents is relatively well understood, little is known about the impact of the allocation of prizes on the effectiveness of tournament incentive schemes for heterogeneous agents. We show that while multiple prize allocation rules are equivalent when agents are symmetric in their ability, the equivalence is broken in the presence of heterogeneity. Under a wide range of conditions, loser‐prize tournaments, that is, tournaments that award a low prize to relatively few bottom performers, are optimal for the firm. The reason is that low‐ability agents are discouraged less in such tournaments, as compared to winner‐prize tournaments awarding a high prize to few top performers, and hence can be compensated less to meet their participation constraints. (JEL M52, J33, J24)

  August 10, 2016   doi: 10.1111/ecin.12380   open full text
• Multiple Equilibria And Deterrence In Airline Markets.
  Federico Ciliberto, Zhou Zhang.
  Economic Inquiry. August 08, 2016
  We use a longitudinal dataset from the U.S. airline industry to estimate three different models for entry games with very general forms of heterogeneity between U.S. carriers in airline markets: a simultaneous game with complete information and two sequential games with or without strategic entry deterrence. In a sequential game with entry deterrence, an incumbent decides whether to incur a cost to deter potential entrants. We show that the model with sequential games with strategic deterrence provides the best fit to the data. We conclude that the results reject the hypothesis of a static model and support the hypothesis of the existence of strategic entry deterrence. (JEL L1)

  August 08, 2016   doi: 10.1111/ecin.12381   open full text
• Public Spending Reallocations And Economic Growth Across Different Income Levels.
  Santiago Acosta‐Ormaechea, Atsuyoshi Morozumi.
  Economic Inquiry. August 03, 2016
  This article examines the effects of public spending reallocations on economic growth. Assembling a disaggregated public spending dataset of 83 countries over the 1970–2011 period, we show that spending reallocations toward education, from health and social protection, have significant growth‐promoting effects across a wide range of countries' income levels. However, income heterogeneity matters, particularly when reallocations involve infrastructure spending. Specifically, a reallocation from this spending to education also promotes growth, albeit primarily when a country's income level is low. This occurs because the effects of infrastructure spending are particularly weak in low‐income countries, possibly due to the low quality of governance. (JEL O43, H50, O11)

  August 03, 2016   doi: 10.1111/ecin.12382   open full text
• Age, Time, Vintage, And Price Indexes: Measuring The Depreciation Pattern Of Houses.
  Iqbal A. Syed, Jan De Haan.
  Economic Inquiry. August 03, 2016
  Age, time, and vintage are key determinants of house prices, yet they cannot be included together linearly or as dichotomous variables in hedonic regressions as construction time + age of house = sale time. We introduce a method where the estimates of the age, time, and vintage effects on prices are obtained in a flexible manner, without requiring us to specify a pre‐determined functional form for any of these variables. Applying our method to Dutch data, we find that the estimated depreciation pattern over the life of houses does not follow the functional forms typically specified for the age of houses in hedonic regressions. (JEL C43, E01, E31, R31)

  August 03, 2016   doi: 10.1111/ecin.12383   open full text
• Corruption, Product Market Competition, And Institutional Quality: Empirical Evidence From The U.S. States.
  Jamie Bologna.
  Economic Inquiry. July 25, 2016
  This article argues that the effect of corruption on competition is dependent on the institutional environment. When institutions are relatively efficient, observed corruption is likely to be associated with relatively less competition. Conversely, in areas with low quality institutions (e.g., excessively burdensome regulations), corruption may lead to relatively more competition. I employ unique data on competition, corruption, and institutional quality across U.S. states from 1997 to 2009 and report that a higher level of corruption is associated with relatively more competition in states with low levels of institutional quality. However, as institutional quality improves, the effect of corruption worsens. Thus, institutional quality is a fundamental determinant of the corruption‐competition relationship. Improving institutional quality, while at the same time reducing corruption, will increase competition and likely improve economic outcomes. (JEL D73, O17, L26)

  July 25, 2016   doi: 10.1111/ecin.12378   open full text
• Fundraising Intermediaries Inhibit Quality‐Driven Charitable Donations.
  Lucas C. Coffman.
  Economic Inquiry. July 25, 2016
  Charitable donations are frequently raised by an intermediary, which accepts donations and subsequently sends the proceeds to the chairty—for example, a workplace campaign for United Way, a 5‐km walk for Susan G. Komen, or buying cookies from a local troop for the Girl Scouts. These fundraisers can greatly increase donations received by a given charity, but how do they affect what types of charities we support? This article shows intermediary fundraisers can make donors insensitive to differences in charity quality: Unattractive charities can receive the same financial support as an attractive charity. In a series of across‐subject experiments, when donations are framed as going directly to the charity, unattractive charities receive fewer and smaller contributions relative to attractive charities; however, when donations for the same charities are collected by (meaningless) intermediary fundraising campaigns, donations become indistinguishable across charities. The fundraising campaign does not affect donor recall of charity identity or evaluation of charity quality; it simply precludes donors from using these data in the donation decision. Follow‐up experiments suggest the results are driven by information overload. (JEL A13, C91, C93, D61, D64, H41)

  July 25, 2016   doi: 10.1111/ecin.12379   open full text
• Testing Commitment Cost Theory In Choice Experiments.
  Claudia Bazzani, Vincenzina Caputo, Rodolfo M. Nayga, Maurizio Canavari.
  Economic Inquiry. July 19, 2016
  In choice experiments, it is commonly assumed that individuals make choices in static and certainty decision‐making conditions. Real‐world choices, however, are usually made in a dynamic setting. Committing a purchase decision under conditions of uncertainty might have a “Commitment Cost” (CC). In this study, we test CC theory using a nonhypothetical choice experiment. Specifically, we test whether choice behavior and willingness to pay estimates differ when individuals have the option to gain present or delayed information or reverse the transaction. Our results suggest that the construction of a dynamic decision context can be relevant in the design of choice experiments. (JEL C90, C93, Q18)

  July 19, 2016   doi: 10.1111/ecin.12377   open full text
• Deep Recessions, Fast Recoveries, And Financial Crises: Evidence From The American Record.
  Michael D. Bordo, Joseph G. Haubrich.
  Economic Inquiry. July 19, 2016
  Do steep recoveries follow deep recessions? Does it matter if a credit crunch or banking panic accompanies the recession? We look at the American historical experience in an attempt to answer these questions. The answers depend on the definition of a financial crisis and on how much of the recovery is considered. But in general recessions associated with financial crises are followed by rapid recoveries. We find three exceptions to this pattern: the recovery from the Great Contraction in the 1930s, the recovery after the recession of the early 1990s, and the present recovery. The present recovery is strikingly more tepid than the 1990s. Possible factors to explain the slowness of this recovery include residential investment and policy uncertainty. (JEL E32, N10, G01)

  July 19, 2016   doi: 10.1111/ecin.12374   open full text
• Chained Credit Contracts And Financial Accelerators.
  Naohisa Hirakata, Nao Sudo, Kozo Ueda.
  Economic Inquiry. July 15, 2016
  Sufficiently high net worth of financial intermediaries (FIs) is considered a necessary condition for financial and macroeconomic stability. In this paper, we explore why the net worth of FIs is important as compared to that of nonfinancial firms using a dynamic general equilibrium model, in which both FIs and nonfinancial firms rely on costly external debt. We find that an exogenous disruption of the FIs' net worth has a greater aggregate impact than does the same‐sized disruption of the nonfinancial firms' net worth. The key reason is that the net worth of the FIs in the United States is small. (JEL E22, E44, G21)

  July 15, 2016   doi: 10.1111/ecin.12376   open full text
• Speculative Profits, Innovation, And Growth.
  Vincenzo Denicolò, Piercarlo Zanchettin.
  Economic Inquiry. July 14, 2016
  When technological change affects the prices of tradeable assets, innovators can obtain speculative profits by exploiting their inside information as to the occurrence of innovations. We propose a tractable model of endogenous growth that formalizes this argument, originally due to Hirshleifer (1971). We then use the model to assess two claims advanced by Hirshleifer, namely, that speculative profits can generate excessive investment in R&D when they add to monopoly rents guaranteed by patent protection, or else even in a perfectly competitive economy. The analysis confirms the first claim, but casts doubts on the second one. (JEL O30, O40)

  July 14, 2016   doi: 10.1111/ecin.12375   open full text
• Big Data And Big Cities: The Promises And Limitations Of Improved Measures Of Urban Life.
  Edward L. Glaeser, Scott Duke Kominers, Michael Luca, Nikhil Naik.
  Economic Inquiry. July 12, 2016
  New, “big data” sources allow measurement of city characteristics and outcome variables at higher collection frequencies and more granular geographic scales than ever before. However, big data will not solve large urban social science questions on its own. Big urban data has the most value for the study of cities when it allows measurement of the previously opaque, or when it can be coupled with exogenous shocks to people or place. We describe a number of new urban data sources and illustrate how they can be used to improve the study and function of cities. We first show how Google Street View images can be used to predict income in New York City, suggesting that similar imagery data can be used to map wealth and poverty in previously unmeasured areas of the developing world. We then discuss how survey techniques can be improved to better measure willingness to pay for urban amenities. Finally, we explain how Internet data is being used to improve the quality of city services. (JEL R1, C8, C18)

  July 12, 2016   doi: 10.1111/ecin.12364   open full text
• Antidumping Echoing.
  Chrysostomos Tabakis, Maurizio Zanardi.
  Economic Inquiry. June 27, 2016
  This article documents that antidumping (AD) “echoing” (i.e., different countries sequentially imposing AD measures on the same product from the same exporter) is common practice among users of AD. We develop a dynamic game where two competing importers can impose AD measures on a third exporting country in one of two periods, if at all. Assuming that governments are politically motivated (favoring their import‐competing industry), AD echoing occurs only for intermediate values of a country's political‐economy parameter. This result is confirmed by our econometric analysis, demonstrating that countries' political‐economy‐driven AD actions are interdependent and should not be analyzed in isolation. (JEL F12, F13, F14)

  June 27, 2016   doi: 10.1111/ecin.12369   open full text
• Strategic Disclosure Of Meaningful Information To Rival.
  Young‐Ro Yoon.
  Economic Inquiry. June 24, 2016
  I study a model of strategic disclosure of a private signal to a rival in the presence of a payoff externality. In the model, two agents forecast the unknown true state of a future period. Specifically, the quality of the signal is also private information. Hence, which quality of signal is revealed for which incentive is the main question of interest. I show that, even when disclosure is costly, the revealing equilibrium, where an agent voluntarily reveals his signal, can exist and it should be a monotone equilibrium. Asymmetry between the penalty for an incorrect forecast and the reward for a correct forecast is a necessary condition for the existence of this revealing equilibrium. If the penalty is larger than the reward, the unique revealing equilibrium is a separating equilibrium, where only the low quality signal is disclosed in order to induce the rival's imitation. On the other hand, if the reward is much larger than the penalty, the unique revealing equilibrium is a pooling equilibrium, where the signal is always revealed in order to induce the rival's deviation. If the reward is not much larger than the penalty, no revealing equilibrium is robust to a costly disclosure. (JEL D81, D82)

  June 24, 2016   doi: 10.1111/ecin.12372   open full text
• Quality Differences, Third‐Degree Price Discrimination, And Welfare.
  Francisco Galera, Pedro Mendi, Juan Carlos Molero.
  Economic Inquiry. June 17, 2016
  We propose a model with two markets to analyze the welfare implications of price discrimination with quality differences. In each market a local firm that operates in that market only competes against a global firm that operates in both markets. Local firms produce higher‐quality goods than the global firm. If the quality levels of the local firms' products are the same, price discrimination is never welfare‐decreasing. If they differ, discrimination is welfare‐increasing if quantity increases. Because of a positive allocation effect of price discrimination, there are parameter values such that welfare increases while total output decreases with price discrimination. (JEL D43, D60)

  June 17, 2016   doi: 10.1111/ecin.12368   open full text
• English Proficiency And Labor Market Performance: Evidence From The Economics Profession.
  William W. Olney.
  Economic Inquiry. June 15, 2016
  This article investigates whether the global spread of the English language provides an inherent advantage to native English speakers. This question is studied within the context of the economics profession, where the impact of being a native English speaker on future publishing success is examined. English speakers may have an advantage because they are writing in their native language, the quality of writing is a crucial determinant of publishing success, and all the top economics journals are published in English. Using a ranking of the world's top 2.5% of economists, this article confirms that native English speakers are ranked 100 spots higher (better) than similar non‐native English speakers. A variety of extensions examine and dispel many other potential explanations. (JEL A11, J44, F66)

  June 15, 2016   doi: 10.1111/ecin.12370   open full text
• Consumption Externalities And Monetary Policy With Limited Asset Market Participation.
  Marco Airaudo, Luca Bossi.
  Economic Inquiry. June 13, 2016
  This article explores the interaction between consumption externalities and limited asset market participation (LAMP) in the standard New‐Keynesian model. We assess the performance of simple Taylor‐type interest rate rules with respect to (a) equilibrium determinacy, (b) the model's ability to simultaneously generate output and inflation volatility similar to the pre‐Volcker era, and (c) the model's response to a technology shock. We find that when individual preferences are affected by average household consumption (Aggregate Consumption Externality), stronger externalities increase the range of LAMP for which multiple equilibria arise even if the policy rule satisfies the Taylor principle. The interaction of LAMP and externalities can generate vast inflation/output relative volatility in line with the one observed in the data in the 1970s. According to our analysis, consumption externalities also affect the responses of endogenous variables to total factor productivity shocks. (JEL E4, E5)

  June 13, 2016   doi: 10.1111/ecin.12366   open full text
• Public Infrastructure Maintenance And The Distribution Of Wealth.
  John Gibson, Felix Rioja.
  Economic Inquiry. June 13, 2016
  When considering how to allocate scarce resources for the development of public infrastructure, many countries have a tendency to neglect maintenance in favor of new infrastructure investment projects. We examine the role of maintenance expenditures on output and on the distribution of wealth in a heterogeneous agents model. In our model, maintenance affects the quality of existing infrastructure and thus the flow of services derived from it. Furthermore, maintenance expenditures also affect the depreciation rates of both public infrastructure and private capital. We calibrate our model to Mexico and consider several policies that increase the flow of resources to infrastructure and find that a policy that allocates all additional resources to new investment is dominated by policies that allocate at least some of the additional resources to maintenance. Specifically, focusing all additional resources on maintenance is shown to generate the largest reduction in inequality, while a more balanced policy that increases both investment and maintenance maximizes output growth. (JEL E00, E62, H54)

  June 13, 2016   doi: 10.1111/ecin.12371   open full text
• Independent Agencies, Political Interference, And Firm Investment: Evidence From The European Union.
  Carlo Cambini, Laura Rondi.
  Economic Inquiry. June 13, 2016
  Investment in network infrastructure is crucial for economic growth. This article studies the impact of the presence of independent regulatory agencies (IRAs) on the investment of European regulated firms. We account for measurement error in formal independence of IRAs by exploiting cross‐country heterogeneity in the quality of political institutions. Results show that regulatory independence increases firms' investment rate by around 1.2%–3.3%. The positive effect survives when we control for social capital accumulation, investor protection, and market liberalization. However, the effect of IRAs is not immune to politics, as we find that political interference in regulatory functions persists in the European Union and is detrimental to firm investment. (JEL D78, L50, D92, H1)

  June 13, 2016   doi: 10.1111/ecin.12373   open full text
• International Deal Experience And Cross‐Border Acquisitions.
  Caleb Stroup.
  Economic Inquiry. June 07, 2016
  I show that corporate directors' human capital facilitates international investments. Directors' experience with cross‐border transactions positively influences firms' decisions to conduct their first cross‐border acquisitions. Cross‐border acquirers are more likely to buy firms headquartered in countries with which the directors have prior deal experience. This effect is strongest for target firms headquartered in culturally and institutionally dissimilar countries. Announced cross‐border acquisitions are received more favorably by financial markets and are more likely to be completed successfully when the announcing firm has a director with cross‐border acquisition experience. These effects are not driven by investment bank involvement in the deal process or by other forms of directors' human capital, and they are robust to endogeneity of director hires. (JEL F23, F21, J24, L23)

  June 07, 2016   doi: 10.1111/ecin.12365   open full text
• Animal Spirits, Heterogeneous Expectations, And The Amplification And Duration Of Crises.
  Tiziana Assenza, William A. Brock, Cars H. Hommes.
  Economic Inquiry. June 03, 2016
  We introduce a simple equilibrium model of a market for loans, where households lend to firms based on heterogeneous expectations about their loan default probability. Agents select endogenously among heterogeneous expectation rules, based upon their relative performance. Due to strong nonlinearities, a small fraction of pessimistic traders already has a large aggregate effect, leading to a crisis characterized by high interest rates for loans and low output. Our stylized model illustrates how animal spirits and heterogeneous expectations and, in particular, how coordination on pessimistic expectations amplifies crises and slows down recovery. (JEL E32, D83, D84)

  June 03, 2016   doi: 10.1111/ecin.12367   open full text
• Regional And Sectoral Evidence Of The Macroeconomic Effects Of Labor Reallocation: A Panel Data Analysis.
  Dimitrios Bakas, Theodore Panagiotidis, Gianluigi Pelloni.
  Economic Inquiry. June 02, 2016
  This article revisits the sectoral shifts hypothesis by examining unemployment fluctuations for 48 U.S. states over the period 1990:M01–2011:M12. We develop a panel approach that incorporates dynamics, parameter heterogeneity, aggregate factors, and cross‐sectional dependence (CSD). Our findings provide support for a positive and significant effect of the employment dispersion index on unemployment. This outcome is robust under alternative specifications and measures of employment dispersion. The empirical evidence corroborates the presence and relevance of CSD and heterogeneity among states. The results show that, once unobserved common factors and cross‐state heterogeneity are taken into account, labor reallocation has a significant effect on unemployment that is half the size of the estimate when cross‐sectional dependence is not taken into account. (JEL E24, E32, J21, R23, C23)

  June 02, 2016   doi: 10.1111/ecin.12363   open full text
• International Tax Competition And The Deficit Bias.
  Calin Arcalean.
  Economic Inquiry. May 30, 2016
  I analyze the dynamic effects of tax competition on public budget deficits. I find that stronger tax competition leads to a fiscal deficit bias at the early stages of financial liberalization. When countries differ in terms of capital mobility, further liberalization leads to external imbalances and diverging fiscal deficits while corporate tax rates converge. Consistent with theory, I find that stronger tax competition increases deficits in a sample of OECD countries, controlling for tax revenues and other standard determinants of fiscal deficits. (JEL E62, F62)

  May 30, 2016   doi: 10.1111/ecin.12358   open full text
• Free Trade Agreements As Dynamic Farsighted Networks.
  James Lake.
  Economic Inquiry. May 30, 2016
  In the presence of multilateral negotiations, are Free Trade Agreements (FTAs) necessary for, or will they prevent, global free trade? I answer this question using a dynamic farsighted model of network formation among asymmetric countries. Ultimately, FTAs prevent global free trade when there are two larger countries and one smaller country but FTAs can be necessary for global free trade when there are two smaller countries and one larger country. The model provides insights into the dynamics of recent real‐world negotiations and recent results in the literature on the empirical determinants of trade agreements. (JEL C71, F12, F13)

  May 30, 2016   doi: 10.1111/ecin.12360   open full text
• Changing Roles Of Ability And Education In U.S. Intergenerational Mobility.
  Jeremiah Richey, Alicia Rosburg.
  Economic Inquiry. May 26, 2016
  Using data on young adults from the 1979 and 1997 National Longitudinal Survey of Youth, we investigate the changing roles of ability and education in the transmission of economic status across generations. We find that ability plays a substantially diminished role for the most recent cohort whereas education plays a much larger role. The first finding results primarily from a smaller effect of children's ability on status, the second from an increased correlation between parental status and educational attainment. A replication of the analysis by gender reveals that the changes in the role of ability are largely driven by men whereas the changes in education's role are largely driven by women. (JEL J62, I24)

  May 26, 2016   doi: 10.1111/ecin.12362   open full text
• Trust, Trustworthiness, And Business Success: Lab And Field Findings From Entrepreneurs.
  Mongoljin Batsaikhan.
  Economic Inquiry. May 19, 2016
  This article contributes to the literature on trust and small businesses in developing countries by linking the level of trust in others that entrepreneurs display in a lab setting to sales data outside of the lab. The results show a robust positive correlation between trust and business success (with sales used as a measure of success): The successful entrepreneurs invested in trust more than the less successful ones did. In the lab, trusting in others is highly profitable, with successful entrepreneurs doing so to the degree required to maximize revenue. However, I found no association between trustworthiness and business success. (JEL O17, L26, C91)

  May 19, 2016   doi: 10.1111/ecin.12359   open full text
• Does Option Theory Hold For Major League Baseball Contracts?
  Alexander Gross, Charles Link.
  Economic Inquiry. May 19, 2016
  We test whether option theory indicated by the Black–Scholes formula is consistent with contract negotiations between teams and players in Major League Baseball (MLB). Teams use contract options in order to obtain the right to buy a player's services for an extra year when negotiating multiple year contracts. These options are similar to European call options, and should reduce the risk of buying volatile assets (players with high variation in performance). In this paper, we model the decision to buy an option (include an option year in the contract) and whether to exercise the option (pay the option salary in the option year versus buying out the option). The results indicate that the behavior of MLB teams is consistent with standard option theory both in terms of buying and exercising options. The sample is the complete population of free agent hitters who signed new contracts between the years 2003 and 2011. We were unable to find any published literature that has addressed this issue. (JEL ZO, H3)

  May 19, 2016   doi: 10.1111/ecin.12361   open full text
• Endogenous Destruction In Conflict: Theory And Extensions.
  Yang‐Ming Chang, Zijun Luo.
  Economic Inquiry. May 09, 2016
  This article develops a general equilibrium model of conflict to characterize the implications of endogenous destruction for bargaining and fighting. Specifically, we consider the scenario where two contending parties engage in bargaining to avoid fighting when there are direct costs (e.g., arms buildups) and indirect costs (e.g., destruction to consumable resources) of conflict. Without imposing specific functional form restrictions on conflict, production, and destruction technologies, we show their interactions in determining an optimal decision between fighting and bargaining. We find that, under the shadow of conflict, bargaining is costly as the contending parties always allocate more resources to arming for guarding settlement through bargaining than in the event of fighting. In contrast to conventional thinking that bargaining is Pareto superior over fighting, we show conditions under which fighting dominates bargaining as the Nash equilibrium choice. The positive analysis may help explain the general causes of fighting, without resorting to the assumption of incomplete information or misperceptions. (JEL D74, H56, C7)

  May 09, 2016   doi: 10.1111/ecin.12354   open full text
• Optimal Enforcement Of Noncompete Covenants.
  Suman Ghosh, Kameshwari Shankar.
  Economic Inquiry. May 05, 2016
  Noncompete covenants or covenant not to compete (CNC) are clauses in employment contracts in which the employee agrees not to gain employment with a competitor firm. In this article, we study the efficiency aspects of such contracts by incorporating the effect of labor mobility restrictions on knowledge transfer across firms, investment decisions by firms, and investment by workers. Following research that shows state‐wise variations in the degree of CNC enforcement, we allow the strength of CNC enforcement to vary as a matter of regulatory policy and derive the optimal strength of enforcement. We also look at how regulations around CNCs should be optimally designed when employers can use collusive agreements, such as “no poaching” agreements, as an alternative to noncompete clauses. Given recent allegations of employer collusion among large Silicon Valley firms, we argue for a cautious approach in designing policies on CNC enforcement. (JEL J24, J41, J63, K31)

  May 05, 2016   doi: 10.1111/ecin.12357   open full text
• The Effects Of Financial And Recognition Incentives Across Work Contexts: The Role Of Meaning.
  Michael Kosfeld, Susanne Neckermann, Xiaolan Yang.
  Economic Inquiry. May 04, 2016
  We manipulate workers' perceived meaning of a job in a field experiment and interact meaning of work with both financial and recognition incentives. Results show that workers exert more effort when meaning is high. Money has a positive effect on performance that is independent of meaning. In contrast, meaning and recognition interact negatively. Our results provide new insights into the stability of incentive effects across important work contexts. They also suggest that meaning and worker recognition may operate via the same motivational channel. (JEL C93, J33, M12, M52)

  May 04, 2016   doi: 10.1111/ecin.12350   open full text
• Category Reporting In Charitable Giving: An Experimental Analysis.
  Jingping Li, Yohanes E. Riyanto.
  Economic Inquiry. May 02, 2016
  We examine the effect of category reporting on charitable giving, aiming to disentangle the publicity effect from the category effect. We compare subjects' donation decisions under three reporting plans: category reporting, where an honored category is prespecified and qualifying subjects were publicly acknowledged; category no reporting, where the same category was utilized but the qualifying donors were not publicly acknowledged; and no reporting, where neither category setting nor public reporting was utilized. We found that category reporting significantly increased average donations relative to no reporting, and that this superiority was due to the dual presence of the category setting and the public reporting. The category setting anchors donations toward the category threshold and increased the average donations when the threshold was modestly set. The public reporting, on the other hand, only worked at the highest category level. It further increased the donations by providing extra social‐image benefits. (JEL C90, C91, D64, H00)

  May 02, 2016   doi: 10.1111/ecin.12355   open full text
• Government Intervention, Land Market, And Urban Development: Evidence From Chinese Cities.
  Jipeng Zhang, Jianyong Fan, Jiawei Mo.
  Economic Inquiry. May 02, 2016
  This article investigates how government intervention in land market affects China's urban development, using data from prefecture‐level cities between 2000 and 2010. We find that government intervention enlarges the impact of positive productivity shocks on housing price appreciation, through mainly the government control over residential land supply. However, we find no significant evidence that high government intervention constrains population growth and leads to wage increase. Such patterns of urban dynamics can be explained by the fact that migrant workers are the driving force behind China's urbanization, but they have limited housing demand and are not well compensated. (JEL P52, R12, H11)

  May 02, 2016   doi: 10.1111/ecin.12353   open full text
• Strategic Enforcement, Intellectual Property Rights, And Contractual R&D.
  Hamid Beladi, Sugata Marjit, Xinpeng Xu, Lei Yang.
  Economic Inquiry. April 21, 2016
  This study examines the role of intellectual property rights (IPRs) in contractual research and development (R&D) in developing countries. We find that strong IPRs provide incentives for firms, both multinational and local, to specialize in R&D activities in which they have competitive advantage (the specialization effect). They also facilitate the switching process from imitators to potential innovators for local firms (the switching effect). Moreover, we also demonstrate that a multinational firm's strategic IPRs enforcement behavior can be an effective instrument for subsidizing contractual R&D in developing countries (the subsidizing effect). We further illustrate how a policy mix of IPRs and a foreign direct investment subsidy in these countries affects R&D activities by adding an offshore R&D subsidiary as an additional organizational form. (JEL L13, O31, O34)

  April 21, 2016   doi: 10.1111/ecin.12352   open full text
• Job Mobility And Earnings Instability.
  Marco Leonardi.
  Economic Inquiry. April 21, 2016
  There is still no consensus on the causes of the increase in the variance of transitory earnings (earnings instability) in the United States. It is difficult to attribute the rise in instability to job mobility because there is no evidence of a concurrent increase in job turnover or separations. Using an error component model of the covariance structure of earnings on Panel Survey of Income Dynamics and Survey of Income and Program Participation data, this study shows that job mobility and the increase in the variance of wage changes upon job change accounts for a substantial part of the increase in earnings instability. The empirical evidence is consistent with the simulations of a search and matching model where an increase in the variance of productivity shocks increases on‐the‐job search and earnings instability among job changers while leaving job turnover approximately constant. (JEL J21, J31)

  April 21, 2016   doi: 10.1111/ecin.12351   open full text
• Long‐Run Effects Of Youth Training Programs: Experimental Evidence From Argentina.
  María laura Alzúa, Guillermo Cruces, Carolina Lopez.
  Economic Inquiry. April 19, 2016
  We study the effect of a job training program for low‐income youth in Cordoba, Argentina. The program included life‐skills and vocational training, as well as internships with private sector employers. Participants were allocated by means of a public lottery. We rely on administrative data on formal employment, employment spells, and earnings, to establish the effects of the program in the short term (18 months), but also—exceptionally for programs of this type in Latin America and in developing countries in general—in the medium term (33 months) and in the long term (48 months). The results indicate sizable gains of about 8 percentage points in formal employment in the short term (about 32% higher than the control group), although these effects dissipate in the medium and in the long term. Contrary to previous results for similar programs in the region, the effects are substantially larger for men, although they also seem to fade in the long run. Program participants also exhibit earnings about 40% higher than those in the control group, and an analysis of bounds indicates that these gains result from both higher employment levels and higher wages. The detailed administrative records also allow us to shed some light on the possible mechanisms underlying these effects. A dynamic analysis of employment transitions indicates that the program operated through an increase in the persistence of employment rather than from more frequent entries into employment. The earnings effect and the higher persistence of employment suggest that the program was successful in increasing the human capital of participants, although the transient nature of these results may also reflect better matches from a program‐induced increase in informal contacts or formal intermediation. (JEL J08, J24, J68, O15)

  April 19, 2016   doi: 10.1111/ecin.12348   open full text
• Effective European Antitrust: Does Ec Merger Policy Generate Deterrence?
  Joseph A. Clougherty, Tomaso Duso, Miyu Lee, Jo Seldeslachts.
  Economic Inquiry. April 18, 2016
  We estimate the deterrence effects of European Commission (EC) merger policy instruments over the 1990–2009 period. Our empirical results suggest phase‐1 remedies uniquely generate robust deterrence as—unlike phase‐1 withdrawals, phase‐2 remedies, and preventions—phase‐1 remedies lead to fewer merger notifications in subsequent years. Furthermore, the deterrence effects of phase‐1 remedies work best in high‐concentration industries, that is, industries where the Herfindahl Hirschman Index is above the 0.2 cut‐off level employed by the EC. Additionally, we find phase‐1 remedies do not deter clearly pro‐competitive mergers, but do deter potentially anti‐competitive mergers in high‐concentration industries. (JEL K21, K40, L40)

  April 18, 2016   doi: 10.1111/ecin.12346   open full text
• The Role Of Information On Retirement Planning: Evidence From A Field Study.
  J. Michael Collins, Carly Urban.
  Economic Inquiry. April 13, 2016
  Many households neglect the pivotal task of planning for retirement. Proposals to stimulate employees to save for retirement in the workplace include tax subsidies, which are costly, and using automatic defaults, which may not complement the heterogeneous preferences of savers. This randomized field study shows that an information‐based intervention increases reported retirement plan participation, emergency savings, and using a budget. Employees offered access to education increased actual retirement deferrals by $26 per month. These results suggest that retirement education programs may be an effective strategy to increase retirement planning and saving behavior. (JEL J26, D14, D91)

  April 13, 2016   doi: 10.1111/ecin.12349   open full text
• Do Gender‐Variant Preferences For Competition Persist In The Absence Of Performance?
  John Ifcher, Homa Zarghamee.
  Economic Inquiry. April 13, 2016
  The well‐established gender gap in preferences for competition has been attributed to gender‐variant feelings about performing in competitive environments. Using a novel task with agency, in which subjects experience competition but cannot perform, we find evidence that performing may be sufficient but not necessary to generate gender‐variant preferences for competition. This suggests that the gender‐gap cannot be eliminated by correcting beliefs alone; that eliminating performance—for example, routinizing tasks—may not eliminate the gender gap; and that there may be heretofore unidentified determinants of preferences for competition—for example, men may prefer payment schemes that are based on social comparison. (JEL J16, C91, J24)

  April 13, 2016   doi: 10.1111/ecin.12347   open full text
• A Designer's Choice Between Single‐Prize And Parallel Tournaments.
  Mürüvvet Büyükboyacı.
  Economic Inquiry. April 08, 2016
  In this article, I theoretically and experimentally compare a designer's profits from two tournament designs. The first design is a standard winner‐take‐all tournament with a single prize. The second design features two winner‐take‐all (parallel) tournaments with different prizes where individuals choose which tournament to enter before competing. I develop a simple model that illustrates how the relative performances of these designs change as contestants' abilities differ. The theoretical model shows that the designer's profit is higher (lower) in the parallel tournament when contestants' abilities differ greatly (are similar). I complement these findings with experimental evidence. The experiments show that the parallel tournament is more profitable under high heterogeneity, whereas under low heterogeneity, the designer is better off with the single‐prize tournament. Furthermore, high‐ability agents under‐participate and low‐ability agents over‐participate in the high‐prize tournament relative to the theoretical prediction. (JEL C72, D82, J33, M51, M52)

  April 08, 2016   doi: 10.1111/ecin.12342   open full text
• The Hazardous Effects Of Antidumping.
  Tibor Besedeš, Thomas J. Prusa.
  Economic Inquiry. April 07, 2016
  We investigate the extent to which antidumping actions eliminate trade altogether. Using quarterly 10‐digit HS‐level export data for products involved in U.S. antidumping cases we find that antidumping actions increase the hazard rate by more than 50%. We find strong evidence of investigation effects with the impact during the initiation and preliminary duty phases considerably larger than once final duties are imposed. There are also important differences with respect to the size of duties with cases with large duties experiencing very large investigation effects. We show the antidumping (AD)‐affected countries are less likely to return to the market even after the AD order is removed. (JEL F13, F14)

  April 07, 2016   doi: 10.1111/ecin.12345   open full text
• The Pass‐Through Of Beer Taxes To Prices: Evidence From State And Federal Tax Changes.
  Vinish Shrestha, Sara Markowitz.
  Economic Inquiry. April 06, 2016
  From a policy perspective, it is crucial to understand how changes in beer taxes affect retail beer prices. This study provides new evidence of the pass‐through rate of state beer taxes to prices in a post‐merger era. Our estimates that use state‐level beer tax changes suggest that a 10‐cent increase in beer taxes raises retail prices by about 17 cents. Comparable findings from the 1991 federal beer tax increase show a rise in retail beer prices of 19–22 cents. Our findings suggest that consumers fully bear the burden of increased beer taxes. (JEL H2, I0, D4)

  April 06, 2016   doi: 10.1111/ecin.12343   open full text
• Integrating Market Alternatives Into The Economic Theory Of Optimal Deterrence.
  Philip A. Curry, Matthew Doyle.
  Economic Inquiry. April 05, 2016
  Leading economic models of crime assume that potential criminals achieve their ends by criminal means or not at all. We develop a framework in which potential criminals can also attain their objectives through voluntary trade. Our framework helps explain several features of the legal system that have proven to be problematic for the canonical approach: why optimal sanctions should be increasing in an individual's criminal history, and why necessity may be a partial defense in some situations. Finally, the inclusion of a voluntary trade option makes the maximization of a utilitarian welfare function identical to minimizing the costs of crime, implying that a long‐standing controversy in the literature is, in part, an artifact of the assumption that criminals face a binary choice set. (JEL K42, D60, H00)

  April 05, 2016   doi: 10.1111/ecin.12344   open full text
• Identifying The Local Economic Development Effects Of Million Dollar Facilities.
  Carlianne Patrick.
  Economic Inquiry. April 01, 2016
  Using incentives to attract firms is the primary economic development policy for many local governments. Yet, relatively little is known about the local economic development outcomes induced by successful attraction of new establishments. The empirical challenge lies in correctly identifying the counterfactual outcome. This article tests for induced economic development in winning counties using a set of highly incentivized large plants. The article makes a methodological contribution by comparing difference‐in‐differences results from a natural experiment (in which counterfactuals are losers reported by Site Selection magazine) with a geographically proximate matching control by design strategy. Estimates are sensitive to identification strategy, with distributional and placebo tests suggesting geographically proximate matching as preferable to the natural experiment. The preferred estimates indicate successful attraction of a large new plant induces modest increases in new economic activity that does not generate fiscal surplus for winning counties. (JEL R11, R31, H71, O18)

  April 01, 2016   doi: 10.1111/ecin.12339   open full text
• Signaling In Higher Education: The Effect Of Access To Elite Colleges On Choice Of Major.
  Valerie Bostwick.
  Economic Inquiry. March 31, 2016
  I propose a model of postsecondary education in which major field of study can be used by individuals to signal productivity to employers. Under this signaling model, I show that geographic areas with high access to elite universities result in fewer science, technology, engineering, and mathematics (STEM) majors among lower ability students at nonelite colleges. This is distinct from the prediction of a full information model in which access to elite schools should only affect high ability individuals directly. Using data from the National Center for Education Statistics' Baccalaureate & Beyond survey, I find evidence that is consistent with the signaling model prediction, specifically a 2.3–3.7 percentage point or 16%–25% decrease in the probability of choosing a STEM major among lower ability students in areas with greater access to elite colleges. (JEL I21, J24)

  March 31, 2016   doi: 10.1111/ecin.12340   open full text
• Persuaded Under Pressure: Evidence From The National Football League.
  Michael J. Lopez.
  Economic Inquiry. March 31, 2016
  We exploit a natural experiment within each National Football League game, finding the first evidence in professional sports that referees succumb to the pressures of satisfying team personnel in the vicinity of possible violations. Using generalized additive models for binomial outcomes, we show that these sideline‐based differences in penalty rates, which are observed on common but influential penalties including pass interference and holding, peak near the centralized location of players and coaches on the sideline. With sizable interests in referee decisions, coaches and players often try to manipulate referee behavior with verbal and nonverbal communications; such actions appear to be persuasive. (JEL ZO, H3)

  March 31, 2016   doi: 10.1111/ecin.12341   open full text
• Democracy And Growth: A Perspective From Democratic Experience.
  Tay‐Cheng Ma, Lishu Ouyang.
  Economic Inquiry. March 21, 2016
  This article investigates the impact of democracy on growth by simultaneously considering a country's secular‐historical experience of democracy and current political regime. The results obtained show that the effect of democracy on growth exhibits an asymmetrical pattern depending on the country's democracy stock. Only in “democratic countries” with “prolonged experiences of democratic rule” can democracy promote growth. This claim stands in contrast to the earlier literature in which there is either no consistent relationship between growth and democracy or perhaps a nonlinear relationship. This conclusion provides circumstantial support for the claim of the “democracy promotes growth” hypothesis. (JEL O43)

  March 21, 2016   doi: 10.1111/ecin.12337   open full text
• Get Out The (Costly) Vote: Institutional Design For Greater Participation.
  Dino Gerardi, Margaret A. McConnell, Julian Romero, Leeat Yariv.
  Economic Inquiry. March 20, 2016
  We examine two commonly discussed institutions inducing turnout: abstention penalties (used in 32 countries) and lotteries rewarding one randomly chosen participant (as proposed on the 2006 Arizona ballot). We analyze a benchmark model in which voters vary in their information quality and participation is costly. We illustrate that both institutions can improve collective outcomes, though lotteries are a more effective instrument asymptotically. Experimentally, we provide strong evidence for selective participation: lab voters participate more when better informed or when institutionally induced. Lotteries fare better than fines, suggesting that they may be a useful alternative to commonly used compulsory voting schemes. (JEL C92, D72, D02)

  March 20, 2016   doi: 10.1111/ecin.12332   open full text
• Conglomerates And Regulation.
  Giacomo Calzolari, Carlo Scarpa.
  Economic Inquiry. March 17, 2016
  Conglomerates operating integrated productions in different regulated and unregulated sectors may benefit of scope economies. However, the precise size of these synergies is often unknown to both rival firms and regulators. We show that the conglomerate's private information on scope economies may negatively affect both the regulated and the unregulated sectors depending on the precise nature of competition (strategic substitutes or complements). We also unveil a novel effect of regulation that involves an informational externality to the conglomerate's rivals. Notwithstanding these complications, and independently of the nature of competition, we show that in our model it is desirable, as for welfare, to let the firm run integrated productions, unless diseconomies of scope may realize. (JEL L51, L43, L52)

  March 17, 2016   doi: 10.1111/ecin.12338   open full text
• Labor Market Performance Effects Of Discrimination And Loss Of Skill.
  Birthe Larsen, Gisela Waisman.
  Economic Inquiry. March 17, 2016
  We examine the impact of discrimination on labor market performance when workers are subject to a risk of losing skills during an unemployment experience. Within a search and matching framework, we show that both natives and immigrants are affected by discrimination. Discrimination in one sector has positive spillovers, inducing employment to increase in the other sector and the effect on labor market performance therefore depends on whether discrimination is present in only one sector or in both. Discrimination may induce workers to train more or less than natives after having lost their skills, dependent upon in which sector there is discrimination. Net output tends to be most negatively affected by discrimination among high‐skilled workers. (JEL J15, J31, J61, J64, J71)

  March 17, 2016   doi: 10.1111/ecin.12335   open full text
• Understanding The Costs Of Consumer Durable Adjustments.
  Michio Suzuki.
  Economic Inquiry. March 17, 2016
  This article examines whether adjustment frictions help account for the patterns of household consumption expenditures observed in the Consumer Expenditure Survey, namely, that the variance of log durable expenditure is four times larger than that of log nondurable expenditure for annual data and this gap substantially widens for quarterly data. Estimating a structural model of household consumption with nondurable and durable goods with the simulated method of moments, I find that the fixed costs associated with durable adjustments are important in matching the cross‐sectional moments. Using the estimated model, I also examine the response of nondurable and durable expenditures to income shocks. (JEL D12, D91, E21)

  March 17, 2016   doi: 10.1111/ecin.12333   open full text
• Criminals' Response To Changing Crime Lucre.
  George F. N. Shoukry.
  Economic Inquiry. March 15, 2016
  How do criminals respond to changes in the benefit from committing a successful crime? This question is relevant for understanding the effectiveness of crime‐fighting policies that reduce demand for illegal goods, disrupt black markets, and otherwise eliminate cheaper avenues to illicit gain. However, the literature has not sufficiently addressed this question, partly because finding a reliable measure of crime lucre is difficult. Using proprietary data on cargo theft, I match historical prices of various goods with their thefts and estimate the price elasticity of theft to be 1.225 over a cumulative 7‐month horizon. (JEL K42)

  March 15, 2016   doi: 10.1111/ecin.12334   open full text
• Bertrand Competition With Asymmetric Marginal Costs.
  Subhasish Dugar, Arnab Mitra.
  Economic Inquiry. March 08, 2016
  This article tests the prediction of three discrete asymmetric duopoly price competition games in the laboratory. The games differ from each other in terms of the size of the cost asymmetry that induces a systematic variation in the difference between the firms' marginal costs. While the standard theory requires the low‐cost firm to set a price just equal to the high‐cost firm's marginal cost, which is identical across all three games, and win the entire market, intuition suggests that market price may increase with a decrease in the absolute difference between the two marginal costs. We develop a quantal response equilibrium model to test our competing conjecture. (JEL L11, L12, C91, D43)

  March 08, 2016   doi: 10.1111/ecin.12328   open full text
• The Effect Of Institutional Expenditures On Employment Outcomes And Earnings.
  Amanda L. Griffith, Kevin N. Rask.
  Economic Inquiry. March 08, 2016
  In recent decades, public attention on colleges has risen in response to rising college expenditures and costs. This study uses the Education Longitudinal Study of 2002 to investigate how spending impacts salaries and employment outcomes, controlling for selection. Our findings indicate that spending on instruction increases salaries, the probability of full‐time employment, and job match, particularly for more disadvantaged students, while there are smaller benefits of spending on student services for less disadvantaged students. Spending on research has large positive impacts on salary and the probability of full‐time employment, especially for disadvantaged students. (JEL I20, J24)

  March 08, 2016   doi: 10.1111/ecin.12336   open full text
• Cash Inflows And Bubbles In Asset Markets With Constant Fundamental Values.
  Charles N. Noussair, Steven Tucker.
  Economic Inquiry. March 04, 2016
  Previous experimental research on asset markets has reported that the level of cash available to traders does not affect asset prices when fundamentals follow a time trajectory that is constant over time. This contrasts with other research indicating that greater cash levels increase prices when fundamental values are decreasing over time. We report a new experiment in which we show that greater initial cash levels are indeed associated with higher prices when fundamental values are constant over time. Thus, high cash levels will lead to bubbles, if the cash is introduced before the market opens. Our results reconcile the two previous sets of findings. (JEL C90, D03, G02, G12)

  March 04, 2016   doi: 10.1111/ecin.12320   open full text
• The Impact Of School Racial Compositions On Neighborhood Racial Compositions: Evidence From School Redistricting.
  Jeffrey M. Weinstein.
  Economic Inquiry. March 03, 2016
  I use data surrounding public school redistricting to study how school racial compositions affect neighborhood racial compositions. This redistricting followed from the end of court‐ordered busing for racial desegregation, significantly changing the racial composition of the assigned school for many neighborhoods. Over a 5‐year period, the impact of an increase in the percent black of the assigned elementary school on the percent black of the neighborhood was positive. The effects increased over time, consistent with a simple model of short‐run neighborhood racial dynamics. These results have implications for potential effects of school racial desegregation policy changes on neighborhood racial compositions. (JEL H75, I28, R23)

  March 03, 2016   doi: 10.1111/ecin.12329   open full text
• Fiscal Federalism, Decentralization, And Economic Growth: A Meta‐Analysis.
  Thushyanthan Baskaran, Lars P. Feld, Jan Schnellenbach.
  Economic Inquiry. March 02, 2016
  The theoretical literature on fiscal federalism has identified several channels through which government decentralization could affect economic growth. Much of the literature focuses on the efficiency aspects of a decentralized provision of public services, but decentralization may also increase growth by raising the ability of the political system to innovate and carry out reforms. In contrast, some authors argue that decentralization increases corruption and government inefficiency, and thus may diminish growth. Given this theoretical ambiguity, several studies have attempted to identify the effect of decentralization on economic growth empirically over the last two decades. We review and conduct a meta‐analysis of this empirical literature. Based on our analysis, we point out open questions and discuss possible ways to answer them. (JEL H77, O43, C52)

  March 02, 2016   doi: 10.1111/ecin.12331   open full text
• Communication And Coordination In A Two‐Stage Game.
  Tjaša Bjedov, Thierry Madiès, Marie Claire Villeval.
  Economic Inquiry. March 01, 2016
  We study the impact of communication on behavior in a two‐stage coordination game with asymmetric payoffs. We test experimentally whether individuals can avoid a head‐to‐head confrontation by means of coordinated strategies. In particular we analyze whether and how quickly a conflict‐avoidance take turn strategy can emerge. First, our results show that players learn to solve the conflict by choosing opposite options at both stages of the game. Second, many adopt a take turn strategy to sustain coordination over time and alleviate the inequality induced by the asymmetry of payoffs. Third, communication increases the likelihood of conflict resolution regardless of whether communication is unilateral or bilateral. (JEL C91, D74, L15, H71)

  March 01, 2016   doi: 10.1111/ecin.12325   open full text
• The Importance Of Legal Form Of Organization On Small Corporation External Financing.
  Daphne Chen, Shi Qi.
  Economic Inquiry. February 29, 2016
  This article quantitatively evaluates the impact of legal form of organization (LFO) choices, C versus S corporation, on small business external financing. A treatment effect model is formulated and estimated to examine the relationship between corporate types and chances of obtaining external financing. The estimation takes into account self‐selection bias associated with LFO choices. This article finds that LFO choices mainly affect small corporations' access to external equity capital, but have no significant impact on loan financing. Specifically, when a small corporation selects the C corporate legal form, the probability of obtaining new external equity is eight times higher compared to when it selects the S corporate legal form. Furthermore, the results suggest that better access to external equity investments, loosening business capital constraints, leads to better growth prospects for small C corporations. These empirical results have important macro‐economic implications on corporate financial and fiscal policies. (JEL G32, G38)

  February 29, 2016   doi: 10.1111/ecin.12330   open full text
• Does A Good Central Banker Make A Difference?
  Matthias Neuenkirch, Peter Tillmann.
  Economic Inquiry. February 26, 2016
  The personalities of central bankers moved center stage during the recent financial crisis. Indeed, several central bankers even became “superstars.” In this article, we investigate whether superstar central bankers have an impact on economic performance. We employ school grades given to central bankers by the financial press, defining as superstars those central bankers receiving the top grade. First, we explain the grades in a probit estimation with measures of economic performance, institutional features, and personal characteristics. Second, we employ a matching approach to account for the endogeneity of grading with respect to economic performance. Using entropy balancing, we identify credible counterfactuals for top‐graded central bankers, that is, nonsuperstar central bankers who face similar situations. Comparing the economic performance of both groups, we find that superstars do indeed matter: a top‐graded central banker faces a significantly more favorable output‐inflation tradeoff than his peers. This effect is driven by outstanding central bankers in both advanced and emerging economies and is especially prevalent in the precrisis subsample. (JEL E52, E58)

  February 26, 2016   doi: 10.1111/ecin.12326   open full text
• The Impact Of Macroeconomic Conditions In Childhood On Adult Labor Market Outcomes.
  Neel Rao.
  Economic Inquiry. February 25, 2016
  This study examines the influence of business cycles in childhood on economic performance later in life. I relate unemployment rates between the year before one's birth and the year of one's 15th birthday to schooling, employment, and income as an adult. The analysis exploits variation in macroeconomic conditions across states over time. I address a number of identification challenges related to cohort effects, linear trends, current events, and economic persistence. The caregiving behaviors and background characteristics of parents are also studied. The average unemployment rate in childhood normally has a negative effect on human capital in adulthood. (JEL J11, J24, J31)

  February 25, 2016   doi: 10.1111/ecin.12327   open full text
• Evaluating Pension Portability Reforms: The Tax Reform Act Of 1986 As A Natural Experiment Abstract.
  Vincenzo Andrietti, Vincent A. Hildebrand.
  Economic Inquiry. February 25, 2016
  This article exploits a change in the vesting rules for employer‐sponsored pension plans introduced by the Tax Reform Act of 1986 to identify the causal effect of pension portability legislation on workers' voluntary mobility decisions. We pool data from different years of the Survey of Income and Program Participation to estimate the impact of this reform using difference‐in‐differences methods. Our results suggest that the reform had a positive and significant impact on voluntary job mobility of the treatment group. (JEL J24, J44, J62, J63, J68)

  February 25, 2016   doi: 10.1111/ecin.12318   open full text
• The Economics Of Exogamous Marriage In Small‐Scale Societies.
  Gregory K. Dow, Clyde G. Reed, Simon Woodcock.
  Economic Inquiry. February 23, 2016
  Marriage is a core institution in almost every human society, including small‐scale societies based on foraging or subsistence agriculture. A crucial dimension of the marriage systems in such societies involves endogamy and exogamy, that is, the choice of a marriage partner from within one's own community or from an outside community. We develop a model in which the exogamy rate is higher when good local matches are scarce due to small community sizes, and when productivity differs across communities due to environmental shocks. These theoretical predictions are supported by econometric analysis of data from the standard cross‐cultural sample. (JEL D13, J11, N30, Z13)

  February 23, 2016   doi: 10.1111/ecin.12321   open full text
• Did Regional Economic Diversity Influence The Effects Of The Great Recession?
  Steven Deller, Philip Watson.
  Economic Inquiry. February 18, 2016
  Using data for U.S. counties from 2005 to 2012, we test whether higher levels of economic diversity mediated the effects of the Great Recession via four measures of stability. Spatial spillover effects are modeled by the use of the spatial Durbin estimator with heteroscedastic errors. The data generally support the central hypothesis that higher levels of diversity within a county are associated with enhanced employment stability across all counties as well as subsets of metro and nonmetro counties. Results for wage stability, however, appear to contradict our other findings. We suggest that underlying labor elasticities can bridge these apparent contradictory results. (JEL R11, R12, O47)

  February 18, 2016   doi: 10.1111/ecin.12323   open full text
• Procurement Auctions With Renegotiation And Wealth Constraints.
  Wei‐Shiun Chang, Timothy C. Salmon, Krista J. Saral.
  Economic Inquiry. February 17, 2016
  Renegotiation is a common practice in procurement auctions which allows for postauction price adjustments and is nominally intended to deal with the problem that sellers might underestimate the eventual costs of a project during the auction. Using a combination of theory and experiments, we examine the effectiveness of renegotiation at solving this problem. Our findings demonstrate that renegotiation is rarely successful at solving the problem of sellers misestimating costs. The primary effect of allowing renegotiation is that it advantages sellers who possess a credible commitment of default should they have underbid the project. Renegotiation allows these weaker types of sellers to win more often and it also allows them to leverage their commitment of default into higher prices in renegotiation from a buyer. (JEL C91, D44, D82)

  February 17, 2016   doi: 10.1111/ecin.12324   open full text
• Are Promises Meaningless In An Uncertain Crowdfunding Environment?
  Janice A. Hauge, Stanley Chimahusky.
  Economic Inquiry. February 16, 2016
  We use a prominent crowdfunding organization, Kickstarter, to analyze the factors that determine timeliness of delivery of rewards to financial backers. We seek to determine the extent to which promised rewards are delivered on time and to characterize projects that have stronger likelihood of timely delivery of rewards. We find that lateness commonly occurs, yet cannot be explained universally with any given set of project characteristics, implying that the uncertainty of rewards involved with crowdfunding entities is difficult to overcome. (JEL D71, D83, L82)

  February 16, 2016   doi: 10.1111/ecin.12319   open full text
• Surprise Me If You Can: The Influence Of Newspaper Endorsements In U.S. Presidential Elections.
  Agustin Casas, Yarine Fawaz, Andre Trindade.
  Economic Inquiry. February 16, 2016
  We here evaluate the heterogeneous effects of newspaper endorsements of U.S. Presidential candidates in the 100 days preceding the 2008 and 2012 elections on the probability that they win the election. Our identification strategy relies on daily variations in the winning probabilities (obtained from the Intrade prediction market) and the fact that newspapers decide their endorsements weeks before their announcement. Endorsements that are classified as surprising and consistent have the largest effect. An endorsement is surprising when the newspaper has not traditionally endorsed the candidate's party. An endorsement is inconsistent when the newspaper leans ideologically to one party but endorses a candidate from another party. (JEL L82, D7)

  February 16, 2016   doi: 10.1111/ecin.12317   open full text
• Survey Measures Of Family Decision Processes For Econometric Analysis Of Schooling Decisions.
  Pamela Giustinelli, Charles F. Manski.
  Economic Inquiry. February 15, 2016
  In this article, we consider the collection of novel subjective data on family processes of schooling decisions. In particular, we review recent progress on survey measurement of expectations, information, and locus of decision of American families within the context of secondary schooling, and we discuss possible future developments by providing concrete examples from recent exploratory efforts. We argue that collection of data on adolescents' and parents' perceptions of the available school options and the application‐and‐admission rules, their subjective expectations about short‐ and long‐term consequences of alternative choices, and their assessments of the locus of decision making within families could greatly enhance economic modeling and contribute to effective econometric analysis of schooling decisions. (JEL C83, D19, D79, D83, D84, I21, I26, J24)

  February 15, 2016   doi: 10.1111/ecin.12322   open full text
• Customer Ownership And Quality Provision In Public Services Under Asymmetric Information.
  Laura Abrardi, Luca Colombo, Pier Angelo Mori.
  Economic Inquiry. January 14, 2016
  The implementation of projects producing external effects is often a source of disagreement and conflict between hosting and nonhosting communities. The article focuses on the impact of participatory ownership on conflict resolution and social welfare in the presence of asymmetric information and imperfect quality monitoring. We show that in such situations the participatory solution may help solve deadlocks that money transfers to a for‐profit operator cannot solve. The analysis highlights three main factors behind this fact. First, a customer‐owned cooperative internalizes, at least partially, the external effects generated by the project. Second, the alignment of cooperative members' preferences with those of the social planner reduces (in some cases eliminates) the distortions caused by information asymmetries. Third, cooperatives require less costly monitoring than their for‐profit counterparts. We also show that cooperatives' productive inefficiency with respect to for‐profits may emerge endogenously as a consequence of a lower pressure to compete on costs for the market. (JEL H23, L33, P13)

  January 14, 2016   doi: 10.1111/ecin.12315   open full text
• Combat Exposure, Cigarette Consumption, And Substance Use.
  Resul Cesur, Alexander Chesney, Joseph J. Sabia.
  Economic Inquiry. January 13, 2016
  This study estimates the relationship between combat exposure and several risky health behaviors: cigarette consumption, binge drinking, and drug use. We find that the U.S. active duty military personnel deployed to combat zones with enemy firefight are more likely to subsequently smoke cigarettes, consume alcohol, and use illicit drugs than their counterparts deployed to noncombat operations. Our results suggest that the mental health effects of combat can explain up to two‐thirds of the estimated association between combat exposure and risky health behaviors. (JEL H56, I12)

  January 13, 2016   doi: 10.1111/ecin.12312   open full text
• Enhanced Citizenship Verification And Children's Medicaid Coverage.
  James Marton, Angela Snyder, Mei Zhou.
  Economic Inquiry. January 13, 2016
  This article examines a potential unintended consequence of the mandated Medicaid citizenship verification requirements of the 2005 Deficit Reduction Act (DRA). We investigate whether or not these new rules led to an increase in the Medicaid exit rate among enrollees using state administrative data from Georgia. We do this by comparing the exit rate for children enrolled in Medicaid whose first coverage recertification occurs just after implementation of the DRA (which we refer to as a “high impact” first recertification) with those whose first recertification occurs just prior (which we refer to as a “low impact” first recertification). Our analysis suggests that children in the high‐impact first recertification group were about 2 percentage points more likely to exit Medicaid than those in the low‐impact group. Furthermore, these additional exits occurred in racial and ethnic groups more likely to be citizens than noncitizens and prereform estimates suggest that there were very few (roughly 0.10%) noncitizen Medicaid enrollees to begin with. Taken together, our results suggest that the DRA‐enhanced citizenship verification rules led to an increase in Medicaid disenrollment, and thus a reduction in coverage, among citizens. (JEL I18, I38, J13)

  January 13, 2016   doi: 10.1111/ecin.12316   open full text
• Which Journal Rankings Best Explain Academic Salaries? Evidence From The University Of California.
  John Gibson, David L. Anderson, John Tressler.
  Economic Inquiry. May 29, 2014
  The ranking of an academic journal is important to authors, universities, journal publishers, and research funders. Rankings are gaining prominence as countries adopt regular research assessment exercises that especially reward publication in high‐impact journals. Yet even within a rankings‐oriented discipline like economics there is no agreement on how aggressively lower‐ranked journals are down‐weighted and in how wide is the universe of journals considered. Moreover, since it is typically less costly for authors to cite superfluous references, whether of their own volition or prompted by editors, than it is to ignore relevant ones, rankings based on citations may be easily manipulated. In contrast, when the merits of publication in one journal or another are debated during hiring, promotion, and salary decisions, the evaluators are choosing over actions with costly consequences. We therefore look to the academic labor market, using data on economists in the University of California system to relate their lifetime publications in 700 different academic journals to salary. We test amongst various sets of journal rankings, and publication discount rates, to see which are most congruent with the returns implied by the academic labor market. (JEL A14, I23, J44)

  May 29, 2014   doi: 10.1111/ecin.12107   open full text
• Routinization‐Biased Technical Change And Globalization: Understanding Labor Market Polarization.
  Jaewon Jung, Jean Mercenier.
  Economic Inquiry. May 29, 2014
  There is now ample evidence that jobs and wages have been polarizing at the extremes of the skill distribution since the early 1990s. Possible explanations include, among others, routinization‐biased technical change (technical progress substituting more easily for labor in performing routine rather than nonroutine tasks) and globalization (more specifically, offshore outsourcing by multinational firms). In this article, we develop a unified theoretical general equilibrium model and examine the implications of each competing hypotheses for labor market polarization. (JEL J21, J23, J24, F66)

  May 29, 2014   doi: 10.1111/ecin.12108   open full text
• Political Ideology And Economic Growth: Evidence From The French Democracy.
  François Facchini, Mickael Melki.
  Economic Inquiry. May 28, 2014
  We provide a test of the impact of voters' political ideology on economic growth and of the role of preferences for government size as a transmission channel. We focus on France from the beginning of its stable democratic experience in 1871. A move of voters' ideology to the right increases economic growth over the total observation period. However, the growth effect of ideology is mediated by voters' preferences for government size only during the post‐World War II period. For reverse causality concerns, we use the political ideology of other historical democracies as an instrument variable for France's ideology. (JEL E6, O43, H11)

  May 28, 2014   doi: 10.1111/ecin.12100   open full text
• Designed To Fail: The Medicare Auction For Durable Medical Equipment.
  Peter Cramton, Sean Ellermeyer, Brett Katzman.
  Economic Inquiry. May 28, 2014
  We examine the theoretical properties of the auction for Medicare Durable Medical Equipment. Two unique features of the Medicare auction are (1) winners are paid the median winning bid and (2) bids are nonbinding. We show that median pricing results in allocation inefficiencies as some high‐cost firms potentially displace low‐cost firms as winners. Further, the auction may leave demand unfulfilled as some winners refuse to supply because the price is set below their cost. We also introduce a model of nonbinding bids that establishes the rationality of a lowball bid strategy employed by many bidders in the actual Medicare auctions and recently replicated in Caltech experiments. We contrast the median‐price auction with the standard clearing‐price auction where each firm bids true costs as a dominant strategy, resulting in competitive equilibrium prices and full efficiency. (JEL D44, I11, H57)

  May 28, 2014   doi: 10.1111/ecin.12101   open full text
• Competitive Balance Measures In Sports Leagues: The Effects Of Variation In Season Length.
  P. Dorian Owen, Nicholas King.
  Economic Inquiry. May 28, 2014
  Appropriate measurement of competitive balance is central to the economic analysis of professional sports leagues. We examine the distributional properties of the ratio of standard deviations (RSD) of points percentages, the most widely used measure of competitive balance in the sports economics literature, in comparison with other standard‐deviation‐based measures. Simulation methods are used to evaluate the effects of changes in season length on the distributions of competitive balance measures for different distributions of the strengths of teams in a league. The popular RSD measure performs as expected only in cases of perfect balance; if there is imbalance in team strengths, its distribution is sensitive to changes in season length. It is therefore not recommended for comparisons of competitive balance for different sports leagues with different numbers of teams and/or games played. (JEL L83, D63, C63)

  May 28, 2014   doi: 10.1111/ecin.12102   open full text
• Wages, Employment, And Statistical Discrimination: Evidence From The Laboratory.
  David L. Dickinson, Ronald L. Oaxaca.
  Economic Inquiry. May 28, 2014
  We report results from laboratory experiments designed to examine statistical discrimination. Our design expands upon existing research by generating data both on wage contracts and unemployment rates of directly competing worker groups. We find some evidence for statistical wage discrimination against workers having an identical expected productivity but a higher productivity variance. However, those same subjects are less likely to be unemployed, suggesting that our employer‐subjects view hiring choice and wage contracts as substitutable. A clear implication is that field data discrimination estimates based on wages alone may overestimate the true impact of such discrimination. (JEL C90, J71)

  May 28, 2014   doi: 10.1111/ecin.12103   open full text
• The Effects Of Public Spending Composition On Firm Productivity.
  Richard Kneller, Florian Misch.
  Economic Inquiry. May 26, 2014
  This paper exploits the unique institutional features of South Africa to estimate the impact of provincial public spending on firm productivity. In contrast to existing microeconomic evidence, we explore the effects of fiscal expenditures and remove the effects of revenue raising policies. Our identification strategy is based on differences in the effects of public spending across firms within the same industry and province. We show that public spending composition affects productivity depending on the capital intensity of firms, with less capital intensive firms being particularly affected. These effects appear to be robust. (JEL D24, H32, H72)

  May 26, 2014   doi: 10.1111/ecin.12092   open full text
• Airline Pricing Behavior Under Limited Inter‐Modal Competition.
  Angela Stefania Bergantino, Claudia Capozza.
  Economic Inquiry. May 26, 2014
  This paper empirically analyzes airline pricing for short‐haul flights in contexts with no credible threat of inter‐modal competition. To this end, we explore the southern Italian market since it is less accessible by other transport modes and thus fares are the direct outcome of air‐related competition. We show, in fact, that market power matters, depending on the level of intra‐modal competition, and that airlines apply differentiated mark‐ups. Besides, consistent with the implementation of inter‐temporal price discrimination (IPD), we find a non‐monotonic inter‐temporal profile of fares with a turning point included in the interval of the 43rd to 45th days before departure. Finally, we provide evidence that in more competitive markets, airlines are more likely to engage in IPD. (JEL L11, L13, L93)

  May 26, 2014   doi: 10.1111/ecin.12104   open full text
• Network Structure In A Link Formation Game: An Experimental Study.
  Alexander Elbittar, Rodrigo Harrison, Roberto Muñoz.
  Economic Inquiry. May 26, 2014
  In this article, we use an experiment to evaluate the performance of alternative refinements in a Myersonian link formation game with a supermodular payoff function. Our results show that a non‐cooperative refinement, the global games (GG) approach, outperforms alternative cooperative refinements (strong Nash equilibrium, coalition‐proof Nash equilibrium, and pairwise stable Nash equilibrium) in explaining the observed experimental behavior in the static game of complete information with three players. The results are robust to some comparative statics and the GG approach shows a high predictive power under incomplete information. However, under repeated interaction or with a greater number of players, the GG approach loses predictive power, but so do the cooperative refinements. The results illustrate the importance of coordination failure in practice and the need to design mechanisms to reduce this effect in practical decision‐making problems. (JEL C70, C92, D20, D44, D82)

  May 26, 2014   doi: 10.1111/ecin.12106   open full text
• An Experimental Study On The Relevance And Scope Of Nationality As A Coordination Device.
  Olga Stoddard, Andreas Leibbrandt.
  Economic Inquiry. May 20, 2014
  In a period marked by extensive cross‐national interactions, nationality may present an important focal point that individuals coordinate on. This study uses an experimental approach to study whether nationality serves as a coordination device. We let subjects from Japan, Korea, and China play coordination games in which we vary information about their partner. The results show that nationality serves as a coordination device if common nationality is the only piece of information available to the subjects. The strength of this device is nationality‐dependent and diminishes when participants are provided with additional information about their partner. We also find that subjects are likely to coordinate on the Pareto‐dominant equilibrium at about the same rate if the partner has a different nationality than if nationality is unknown. (JEL C91, C92, Z1, Z13)

  May 20, 2014   doi: 10.1111/ecin.12097   open full text
• Quasi‐Experimental Analysis On The Effects Of Adoption Of A Value Added Tax.
  Alex Ufier.
  Economic Inquiry. May 19, 2014
  Value added taxes (VATs) have become an important source of government funding in past decades, but little empirical work has been carried out on their macroeconomic impacts. As the decision to implement a VAT is endogenous, regression methods analyzing the impact of the policy choice will yield biased estimates. To solve this problem, I first model the VAT adoption decision for 192 countries using survival analysis. I then match adopters to non‐adopters using propensity score matching. I find that VAT adoption is associated with an increase in growth and investment as well as lower inflation and government spending as a share of GDP. (JEL H20, H21)

  May 19, 2014   doi: 10.1111/ecin.12099   open full text
• Contracts As Rent‐Seeking Devices: Evidence From German Soccer.
  Eberhard Feess, Michael Gerfin, Gerd Muehlheusser.
  Economic Inquiry. May 14, 2014
  Recent theoretical research has identified many ways how contracts can be used as rent‐seeking devices vis‐à‐vis third parties, but there is no empirical evidence on this issue so far. To test some basic qualitative properties of this literature, we develop a theoretical and empirical framework in the context of European professional soccer where (incumbent) teams and players sign binding contracts which, however, are frequently renegotiated when other teams (entrants) want to hire the player. Because they weaken entrants in renegotiations, long‐term contracts are useful rent‐seeking devices for the contracting parties. However, they reduce the likelihood of (mutually beneficial) transfers, which generates a trade‐off in the spirit of Aghion and Bolton (1987). Using a data set from the German “Bundesliga,” our model predictions are broadly confirmed. (JEL L14, J63, L40, L83)

  May 14, 2014   doi: 10.1111/ecin.12098   open full text
• Rising R&D Intensity And Economic Growth.
  Andreas Pollak.
  Economic Inquiry. May 07, 2014
  Over the past decades, private R&D spending in the United States and other developed countries has been growing faster than gross domestic product. At the same time, the growth rates of per-capita and aggregate output have been rather stable, possibly declining slightly. This article proposes a growth model that can account for the observed phenomenon by explicitly describing competition among technological leaders and followers in individual markets in a way that is consistent with existing studies on firms' motivation to invest in R&D. The model shows the possibility that the unsustainable trend of rising R&D intensity persists for a very long time. (JEL O3, O4, L1)

  May 07, 2014   doi: 10.1111/ecin.12096   open full text
• Switching Regression Estimates Of The Intergenerational Persistence Of Consumption.
  Sheng Guo.
  Economic Inquiry. May 01, 2014
  The influential economic theory of intergenerational transfers predicts a negative connection between credit constraints and intergenerational mobility of consumption. Existing work has used bequest receipt to signal a parent's access to credit markets when investing in his children's human capital. However, measurement error in bequest receipt generates misclassification error and, in turn, attenuation bias. Employing switching regressions with imperfect sample separation to deal with this error, we show that the intergenerational persistence of consumption in the United States for credit constrained families is much higher than that for unconstrained families, contrary to what the theory implies. This means that children from constrained families are more likely to have consumption levels similar to those of their parents than children from unconstrained families. Our results are robust to the choice of bequest variables and other predictive variables in the switching equation. (JEL C13, D12, E21, J62)

  May 01, 2014   doi: 10.1111/ecin.12094   open full text
• Household Production And Sexual Orientation.
  Douglas W. Allen.
  Economic Inquiry. April 30, 2014
  The 2006 Canada census is used, along with a well‐known model of household production, to estimate the value of household commodities produced by gay, lesbian, and heterosexual couples. The results show some intriguing differences and similarities. Unlike heterosexuals, gay and lesbian couples respond differently to changes in the cost of time. However, all couples are characterized by the importance of market goods over time and the importance of human capital in the market over the home, with respect to household production. Hence, although there are differences in the sexual division of labor between households of different sexual orientations, the value of household commodities is mostly driven by differences in the amount of market goods used in the home. Market goods are determined by income, and differences in income within a couple‐type swamp differences in income across couple‐types, and as a result there is no statistical difference in the value of household commodities produced across the three sexual orientations. (JEL D13)

  April 30, 2014   doi: 10.1111/ecin.12095   open full text
• Entry And Exit, Product Variety, And The Business Cycle.
  Satyajit Chatterjee, Russell Cooper.
  Economic Inquiry. April 21, 2014
  We study the stochastic behavior of a dynamic general equilibrium model with monopolistic competition. Each seller sells his product in the consumption goods as well as the investment goods market and has market power in both. Consumers derive utility from a constant elasticity of substitution (CES) aggregate of all the consumption goods and augment their capital stock by a CES aggregate of all the investment goods. We analyze the equilibrium of this economy allowing for an endogenous determination of the number of firms and therefore of products. The principal effect we wish to highlight is the endogenous propagation and magnification of technology and preference disturbances through product space variations. (JEL E32, D43, L16)

  April 21, 2014   doi: 10.1111/ecin.12091   open full text
• New Measures Of The Costs Of Unemployment: Evidence From The Subjective Well‐Being Of 3.3 Million Americans.
  John F. Helliwell, Haifang Huang.
  Economic Inquiry. April 21, 2014
  Using two large U.S. surveys, we estimate the effects of unemployment on the subjective well‐being (SWB) of the unemployed and the rest of the population. For the unemployed, the nonpecuniary costs of unemployment are several times as large as those resulting from lower incomes, while the indirect effect at the population level is 15 times as large. For those who are still employed, a one percentage point increase in local unemployment has an impact on well‐being roughly equivalent to a 4% decline in household income. We also find evidence indicating that job security is an important channel for the indirect effects of unemployment. (JEL E24, H23, J64, J68)

  April 21, 2014   doi: 10.1111/ecin.12093   open full text
• Labor Contracts And Flexibility: Evidence From A Labor Market Reform In Spain.
  Victor Aguirregabiria, Cesar Alonso‐Borrego.
  Economic Inquiry. February 25, 2014
  This paper evaluates the effects of a labor market reform in Spain that removed restrictions on fixed‐term or temporary contracts. Our empirical results are based on longitudinal firm‐level data that cover observations before and after the reform. We posit and estimate a dynamic labor demand model with indefinite and fixed‐term labor contracts, and a general structure of labor adjustment costs. Experiments using the estimated model show important positive effects of the reform on total employment (i.e., a 3.5% increase) and job turnover. There is a strong substitution of permanent by temporary workers (i.e., a 10% decline in permanent employment). The effects on labor productivity and the value of firms are very small. In contrast, a counterfactual reform that halved all firing costs would produce the same employment increase as the actual reform, but much larger improvements in productivity and in the value of firms. (JEL J23, J32, J41)

  February 25, 2014   doi: 10.1111/ecin.12077   open full text
• An Estimate Of The Age Distribution's Effect On Carbon Dioxide Emissions.
  Steven Lugauer, Richard Jensen, Clayton Sadler.
  Economic Inquiry. February 25, 2014
  We estimate the age distribution's impact on carbon dioxide emissions from 1990 to 2006 by exploiting demographic variation in a panel of 46 countries. To eliminate potential bias from endogeneity or omitted variables, we instrument for the age distribution in a country's current population with lagged birth rates, and the regressions control for total population, total output, and country and year fixed effects. Carbon dioxide emissions increase with the share of the population aged 35 to 49 years, and this result is statistically significant and quantitatively large. (JEL Q4, J1)

  February 25, 2014   doi: 10.1111/ecin.12054   open full text
• An Experimental Examination Of Fisheries With Concurrent Common Pool And Individual Quota Management.
  Christopher M. Anderson, Hirotsugu Uchida.
  Economic Inquiry. February 25, 2014
  An emerging trend in fisheries management allows different groups of harvesters pursuing the same stock, even under the same management plan, to manage their effort using different rules, so long as each group remains within its “catch share” portion of mortality. Thus harvesters in a single fishery, with a single total allowable catch, concurrently must respond strategically to the behavior not only of those being managed as they are but also of those facing incentives of different management. In a novel quasi‐continuous time experimental environment with a contemporaneous price externality, we explore the effort timing behavior of harvesters managed under common pool (CP) management with that of subjects managed with individual quotas (IQ). Consistent with Nash equilibrium, CP‐managed subjects race‐to‐fish, exerting high levels of effort to secure landings but selling at correspondingly low prices. IQ‐managed subjects in the same fishery hold effort back until the CP fishery closes, and use their quota over the balance of the season at a lower weekly landings level, receiving higher prices. After experiencing both management systems, subjects choose to be in a group with IQ by a 3:1 margin. (JEL Q22, Q28, C73)

  February 25, 2014   doi: 10.1111/ecin.12057   open full text
• Protestantism And Education: Reading (The Bible) And Other Skills.
  Timo Boppart, Josef Falkinger, Volker Grossmann.
  Economic Inquiry. February 25, 2014
  During industrialization, Protestants were more literate than Catholics. This paper investigates whether this fact may be led back to the intrinsic motivation of Protestants to read the bible and to what extent other education motives might have been involved as well. We employ a historical data set from Switzerland which allows us to differentiate between different cognitive skills: reading, numeracy, essay writing, and Swiss history. We develop an estimation strategy to examine whether the impact of religious denomination was particularly large with respect to reading capabilities. We find support for this hypothesis. However, we also find evidence which is consistent with the view that Protestants' education motives went beyond acquiring reading skills. (JEL I20)

  February 25, 2014   doi: 10.1111/ecin.12058   open full text
• Gender Differences In Experimental Wage Negotiations.
  Marcus Dittrich, Andreas Knabe, Kristina Leipold.
  Economic Inquiry. February 25, 2014
  We examine behavioral gender differences and gender pairing effects in a laboratory experiment with face‐to‐face alternating‐offers wage bargaining. Our results suggest that gender differences in bargaining behavior are role‐dependent. We find that women obtain worse bargaining outcomes than men when they take on the role of employees, but not when they act as employers. Differences in bargaining outcomes can be explained by the bargaining parties' initial offers and counteroffers. We do not find evidence for behavioral differences between men and women in the process of alternating offers after first offers and counteroffers are made.(JEL J16, C78, C91)

  February 25, 2014   doi: 10.1111/ecin.12060   open full text
• Characterizing Economic Growth Paths Based On New Structural Change Tests.
  Nuno Sobreira, Luis C. Nunes, Paulo M. M. Rodrigues.
  Economic Inquiry. February 25, 2014
  One of the prevalent topics in the economic growth literature is the debate between neoclassical, semi‐endogenous, and endogenous growth theories regarding the model that best describes the data. An important part of this discussion can be summarized in three mutually exclusive hypotheses: the “constant trend,” the “level shift,” and the “slope shift” hypotheses. In this article we propose the characterization of a country's economic growth path according to these break hypotheses. We address the problem in two steps. First, the number and timing of trend breaks is determined using new structural change tests that are robust to the presence, or not, of unit roots, surpassing technical and methodological concerns of previous empirical studies. Second, conditional on the estimated number of breaks and break dates, a statistical framework is introduced to test for general linear restrictions on the coefficients of the suggested linear disjoint broken trend model. We further show how the aforementioned hypotheses, regarding the economic growth path, can be analyzed by a test of linear restrictions on the parameters of the breaking trend model. We apply the methodology to historical per capita gross domestic product for an extensive list of countries. The results support the three alternative hypotheses for different sets of countries. (JEL C22, F43, O40)

  February 25, 2014   doi: 10.1111/ecin.12076   open full text
• Forecasting Crude Oil Price Movements With Oil‐Sensitive Stocks.
  Shiu‐Sheng Chen.
  Economic Inquiry. February 25, 2014
  This paper uses monthly data from 1984:M10 to 2012:M8 to show that oil‐sensitive stock price indices, particularly those in the energy sector, have strong power in predicting nominal and real crude oil prices at short horizons (1‐month‐ahead predictions), using both in‐ and out‐of‐sample tests. In particular, the forecasts based on oil‐sensitive stock price indices are able to outperform significantly the no‐change forecasts. For example, using the NYSE Arca (AMEX) oil index as a predictor, the 1‐month‐ahead forecasts for nominal crude oil prices reduce the mean squared prediction error by between 22% (for the West Texas Intermediate oil price) and 28% (for the Dubai oil price). Moreover, we find that the directional forecast based on the AMEX oil index is significantly better than a 50:50 coin toss. The novelty of this analysis is that it proposes a new and valuable predictor that both reflects timely market information and is readily available for forecasting the spot oil price.(JEL G17, Q43, Q47, C53)

  February 25, 2014   doi: 10.1111/ecin.12053   open full text
• Signal Extraction And Rational Inattention.
  Yulei Luo, Eric R. Young.
  Economic Inquiry. February 25, 2014
  In this paper we examine the implications of two theories of informational frictions, signal extraction (SE) and rational inattention (RI), for optimal decisions and economic dynamics within the linear‐quadratic‐Gaussian (LQG) setting. We first show that if the variance of the noise and channel capacity (or marginal information cost) is fixed exogenously in the SE and RI problems, respectively, the two environments lead to different policy and equilibrium asset pricing implications. Second, we find that if the signal‐to‐noise ratio and capacity in the SE and RI problems are fixed, respectively, the two theories generate the same policy implications in the univariate case, but different policy implications in the multivariate case. We also show that our results do not depend on the presence of correlation between fundamental and noise shocks. We then discuss the applications to macroeconomic models of permanent income and price‐setting. (JEL C61, D81, E21)

  February 25, 2014   doi: 10.1111/ecin.12073   open full text
• Cultural Constraints On Innovation‐Based Growth.
  Mariko J. Klasing, Petros Milionis.
  Economic Inquiry. February 25, 2014
  To what extent does the cultural composition of a society impose a constraint on its long‐run growth potential? We study this question in the context of an innovation‐based model of growth where cultural attitudes are endogenously transmitted from one generation to the next. Focusing on attitudes regarding patience, we analyze the two‐way interaction between economic growth and the intergenerational transmission of patience. Exploiting this interaction, we compare the long‐run growth performance of a culturally heterogeneous society where patience is initially underrepresented in the population with a culturally homogeneous society where all agents are perfectly patient. Our main result is that in the absence of any intrinsic preferences of patient parents to transmit their attitudes to their children, the development paths of the two societies are bound to diverge, with the culturally heterogeneous society experiencing lower growth rates. Yet, if patient parents ceteris paribus prefer their children to be patient like them, we show that the two societies can in the long run grow at the same rate.(JEL D91, E24, O30, O40, Z10)

  February 25, 2014   doi: 10.1111/ecin.12067   open full text
• Accounting For The Cyclical Dynamics Of Income Shares.
  Enchuan Shao, Pedro Silos.
  Economic Inquiry. February 25, 2014
  Over the business cycle, labor's share of output is negatively but weakly correlated with output, and it lags output by about four quarters. Profits' share is strongly pro‐cyclical. It neither leads nor lags output, and its volatility is about five times that of output. Those assumptions relate to the structure of aggregate technology and the degree of competition in factor markets. Despite much evidence in favor of time‐varying income shares, macroeconomics still lacks models that can account for their time series facts. This article constructs a model that can replicate those facts. We introduce costly entry of firms in a model with frictional labor markets and find a link between the ability of the model to replicate income shares' dynamics and the ability of the model to amplify and propagate shocks. That link is a weak correlation between the real interest rate and output, a fact in U.S. data but a feature that models of aggregate fluctuations have had difficulty achieving. (JEL E3, E25, J3, E24)

  February 25, 2014   doi: 10.1111/ecin.12065   open full text
• Quality‐Adjusted Human Capital And Productivity Growth.
  Md. Rabiul Islam, James B. Ang, Jakob B. Madsen.
  Economic Inquiry. February 25, 2014
  This article examines the influence of quality‐adjusted educational attainment on growth and tests whether it facilitates the transfer of technology developed at the frontier for a panel of 60 countries. Using outcomes of pathogen stress as instruments, the results show that quality‐adjusted educational attainment and its interaction with distance to the frontier play important roles for growth. (JEL I20, O30, O40)

  February 25, 2014   doi: 10.1111/ecin.12052   open full text
• Aggregation And The Staggering Of Price Changes.
  Emmanuel Dhyne, Jerzy Konieczny.
  Economic Inquiry. February 25, 2014
  Temporal distribution of individual price changes is of crucial importance for business cycle theory and for the microfoundations of price adjustment. While it is routinely assumed that price changes are staggered over time, both theory and evidence are ambiguous. We use a large Belgian data set to analyze whether price changes are staggered or synchronized. We find that the more aggregated are the data, the closer is the distribution to perfect staggering. The results hold both for aggregation across products, and across locations. They are consistent with an economy in which idiosyncratic shocks are the main cause of price changes. (JEL E30, E31, D40)

  February 25, 2014   doi: 10.1111/ecin.12072   open full text
• Equipment And Structures Capital: Accounting For Income Differences.
  Piyusha Mutreja.
  Economic Inquiry. February 25, 2014
  In this article, I present comparable measures of equipment capital and structures capital stocks for 119 countries. Cross‐country variation in equipment capital‐output ratio is over twice the variation in structures capital and aggregate physical capital. The dispersion in equipment capital has also increased overtime. Using development accounting that incorporates equipment and structures capital, I offer evidence relevant to the debate on the importance of productivity versus factors in accounting for income differences. The new measures of heterogeneous capital reduce the burden on total factor productivity by up to 5%. (JEL O11, O47, E22)

  February 25, 2014   doi: 10.1111/ecin.12062   open full text
• Fiscal Policy And Lending Relationships.
  Giovanni Melina, Stefania Villa.
  Economic Inquiry. February 25, 2014
  This paper studies how fiscal policy affects loan market conditions in the United States. First, it conducts a structural vector‐autoregression analysis showing that the bank spread responds negatively to an expansionary government spending shock, while lending increases. Second, it illustrates that these results are mimicked by a dynamic stochastic general equilibrium model where the bank spread is endogenized via the inclusion of a banking sector exploiting lending relationships. Third, it shows that lending relationships represent a friction that generates a financial accelerator effect in the transmission of the fiscal shock. (JEL E44, E62)

  February 25, 2014   doi: 10.1111/ecin.12051   open full text
• Voting For Income‐Immiserizing Redistribution In The Meltzer–Richard Model.
  Richard C. Barnett, Joydeep Bhattacharya, Helle Bunzel.
  Economic Inquiry. February 25, 2014
  This paper argues that income received via redistributive transfers, unlike labor income, requires no direct sacrifice of leisure; this makes it attractive to many voters even if it leaves them poorer. This point is made within the classic Meltzer and Richard (1981) model wherein heterogeneous voters evaluate an income‐redistribution program that finances a lump‐sum transfer to all via a distorting income tax. The political‐equilibrium policy under majority rule is the tax most preferred, utility‐wise, by the median voter. Ironically, this voter, and many poorer voters, may support a redistribution policy that leaves them poorer in income terms but with higher utility. (JEL H2, E6, D72)

  February 25, 2014   doi: 10.1111/ecin.12059   open full text
• The Impact Of Restaurant Calorie Labels On Food Choice: Results From A Field Experiment.
  Brenna Ellison, Jayson L. Lusk, David Davis.
  Economic Inquiry. February 25, 2014
  Using field experiment data, we compare the effectiveness of calorie labels to a “fat tax” at reducing calories ordered. Results from a structural model of consumer demand show that numeric labels did not influence food choice, but symbolic traffic light labels caused restaurant patrons to select lower‐calorie menu items; thus, adding a traffic light symbol could enhance the effectiveness of the numeric calorie label (as currently proposed by the Food and Drug Administration). Additionally, our model projects that labels can both reduce intake more than a 10% tax on high‐calorie items and a 10% subsidy on low‐calorie items. (JEL Q18, I18)

  February 25, 2014   doi: 10.1111/ecin.12069   open full text
• Zoning Under Spatial Price Discrimination.
  Juan Carlos Bárcena‐Ruiz, Francisco Javier Casado‐Izaga.
  Economic Inquiry. February 25, 2014
  This paper investigates zoning in a duopoly model of spatial price discrimination. We find that the zone in which the firms are not allowed to locate depends on the bias of the regulator. A bias toward firms is deduced when locations around the central area are forbidden, and a bias toward consumers exists when firms are only allowed to locate at places around the central area. The design of the zoned area guarantees that firms locate optimally and works under simultaneous or sequential choice of locations by the two firms. (JEL L13, R38)

  February 25, 2014   doi: 10.1111/ecin.12071   open full text
• The Taxpayer Relief Act Of 1997 And Homeownership: Is Smaller Now Better?
  Amelia M. Biehl, William H. Hoyt.
  Economic Inquiry. February 25, 2014
  Prior to the Taxpayer Relief Act of 1997 (TRA97), the capital gain from the sale of a home was taxed differently for those over and under the age of 55. TRA97 eliminated this differential treatment. Using a difference‐in‐difference approach, we find that home sellers slightly under the age of 55 were 6.2% more likely to move for a less expensive house to maintain, 6.6% less likely to move for a larger place, and 5.2% more likely to reside in a condominium after TRA97's enactment, relative to those slightly over 55. (JEL H24, R21)

  February 25, 2014   doi: 10.1111/ecin.12056   open full text
• Contract Design And Self‐Control With Asymmetric Information.
  Sanxi Li, Jianye Yan, Binqing Xiao.
  Economic Inquiry. February 25, 2014
  We study optimal contracting by a monopolistic seller of investment goods to a time‐inconsistent consumer and, in doing so, introduce asymmetric information to the model of DellaVigna and Malmendier (2004). We find (1) the below‐marginal‐cost‐pricing rule may fail for a low‐value consumer; (2) the firm's profit is no longer unaffected by the consumer's short‐run impatience, as the latter is sophisticated. We find that there is an important threshold value of short‐run patience. When the consumer's short‐term patience is below this level, then, as the patience increases, the firm suffers. When the consumer's short‐run patience is above this threshold, then, as it increases, the firm benefits. Finally, we show that unlike monopoly, perfect competition with asymmetric information achieves the first‐best outcome. (JEL D03, D82, D91)

  February 25, 2014   doi: 10.1111/ecin.12068   open full text
• Durable Goods Price Cycles: Theory And Evidence From The Textbook Market.
  Eric W. Bond, Toshiaki Iizuka.
  Economic Inquiry. February 25, 2014
  We study the pricing policy of a monopolist selling a durable good with the features of a textbook. We assume buyers differ in their valuation of the good and propensity to resell, and identify the possibility of a positive relationship between the quantity of used goods and the price of a new good, and also a higher price for new goods in the last period before a new edition is introduced. Our empirical analysis supports this model: textbook prices increase as the share of used textbooks increases and the end of the current edition approaches. (JEL D420, L120)

  February 25, 2014   doi: 10.1111/ecin.12055   open full text
• Reputation Effects In The Market Of Certifiers: Evidence From The Audit Industry.
  áron Tóth.
  Economic Inquiry. February 25, 2014
  Certifiers verify unobserved product characteristics for buyers and thereby alleviate informational asymmetries and facilitate trade. When sellers pay for the certification, however, certifiers can be tempted to bias their opinion to favor sellers. Indeed, accounting scandals and inflated credit ratings suggest sellers may prefer to select dishonest certifiers. I test this proposition by estimating the effect of adverse quality signals on audit demand. Exploiting the natural experiment of Arthur Andersen's demise, I find that auditors with worse quality signals experience a fall in demand. This suggests that reputation effects are at work even in the presence of conflicts of interest. (JEL L15, L8, M4)

  February 25, 2014   doi: 10.1111/ecin.12063   open full text
• Identifying The Effect Of Open Access On Citations Using A Panel Of Science Journals.
  MARK J. McCABE, CHRISTOPHER M. SNYDER.
  Economic Inquiry. February 20, 2014
  An open‐access journal allows free online access to its articles, obtaining revenue from fees charged to submitting authors or from institutional support. Using panel data on science journals, we are able to circumvent problems plaguing previous studies of the impact of open access on citations. In contrast to the huge effects found in these previous studies, we find a more modest effect: moving from paid to open access increases cites by 8% on average in our sample. The benefit is concentrated among top‐ranked journals. In fact, open access causes a statistically significant reduction in cites to the bottom‐ranked journals in our sample, leading us to conjecture that open access may intensify competition among articles for readers' attention, generating losers as well as winners. (JEL L17, O33)

  February 20, 2014   doi: 10.1111/ecin.12064   open full text
• Product Bundling And Incentives For Mergers And Strategic Alliances.
  Sue H. Mialon.
  Economic Inquiry. November 04, 2013
  This paper analyzes firms' choice of a merger or a strategic alliance in bundling their products with other complementary products. Tying two products of unequal value makes them equally valuable as they become inseparable for purchase. Consequently, firms can charge a higher price for the bundled products than before. If foreclosure is not the main purpose of bundling, firms would prefer strategic alliances to mergers because mergers only intensify competition by internalizing the complementarities of two products. In equilibrium, bundling occurs only through strategic alliances. (JEL L4, L11, L13, L23)

  November 04, 2013   doi: 10.1111/ecin.12047   open full text
• Regional House Price Dynamics And Voting Behavior In The Fomc.
  Stefan Eichler, Tom Lähner.
  Economic Inquiry. October 31, 2013
  This paper examines the impact of house price gaps in Federal Reserve districts on the voting behavior in the Federal Open Market Committee (FOMC) from 1978 to 2010. Applying a random effects ordered probit model, we find that a higher regional house price gap significantly increases (decreases) the probability that this district's representative in the FOMC casts interest rate votes in favor of tighter (easier) monetary policy. In addition, our results suggest that Bank presidents react more sensitively to regional house price developments than Board members do. (JEL E31, E58, R31)

  October 31, 2013   doi: 10.1111/ecin.12050   open full text
• Nonlinear Pricing Strategies And Competitive Conditions In The Airline Industry.
  Manuel A. Hernandez, Steven N. Wiggins.
  Economic Inquiry. October 27, 2013
  This paper empirically examines the effect of competitive conditions on nonlinear pricing strategies in the airline industry. We use a unique data set to analyze the impact of concentration and the competitive pressures generated by Southwest and other low cost carriers on the relative prices within a menu of fares. The menu orders tickets by quality based upon cabin and ticket restrictions. We analyze the ratio of fares charged for various qualities within the menu to the fares charged for the lowest quality nonrefundable, restricted tickets. We observe a fare compression for only the highest fares on only the most concentrated (i.e., monopoly) routes. This result is something of a puzzle given a monopolist's market power. We find, however, that actual and potential competition from Southwest reduces low end fares and generally leads to substantial fare compression throughout the fare menu. (JEL L11, L93)

  October 27, 2013   doi: 10.1111/ecin.12045   open full text
• Willful Blindness: The Inefficient Reward Structure In Academic Research.
  Stan J. Liebowitz.
  Economic Inquiry. October 24, 2013
  This article examines how economics departments judge research articles and assign credit to authors. It begins with a demonstration that only strictly prorated author credit induces researchers to choose efficient sized teams. Nevertheless, survey evidence reveals that most economics departments only partially prorate authorship credit, implying excessive coauthorship. Indeed, a half‐century increase in coauthorship may be better explained by incomplete proration than by any increased specialization among authors. A possible explanation for the reliance on incomplete proration is the self‐interest of economists who are more likely to engage coauthorship—full professors. The self‐interest of senior faculty may also explain the relatively small role given to citations in senior promotions. A rational response by economists to the under‐proration of author credit is to engage in false authorship. Although false authorship is of dubious ethical status, it may have the perverse impact of improving the efficiency of team production. Grossly excessive coauthorship, where little attention is paid to most authors listed on a paper, as found in some other academic disciplines, may be the path down which economics is headed if the reward structure is not altered. (JEL A14, O30, I23)

  October 24, 2013   doi: 10.1111/ecin.12039   open full text
• An Economic Theory Of Workaholics And Alcoholics.
  Aaron Finkle, Dongsoo Shin.
  Economic Inquiry. October 18, 2013
  This paper considers the role of alcohol in agency problems in order to provide an economic rationale for alcoholics and workaholics. In our model, alcohol reduces productivity, but also can make imbibers blurt private information. We show that in the optimal contract, low‐productivity workers are compelled to over‐indulge in alcohol, while high‐productivity workers overproduce output. Thus, workers are made into “alcoholics” and “workaholics” depending on their productivity. We conclude that excessive drinking (working) may be the result, not the cause, of low (high) productivity of workers. (JEL D82, VSOP)

  October 18, 2013   doi: 10.1111/ecin.12049   open full text
• Experts And Their Records.
  Alexander Frankel, Michael Schwarz.
  Economic Inquiry. July 28, 2013
  A market where short‐lived customers interact with long‐lived experts is considered. Experts privately observe which treatment best serves a customer, but are free to choose more or less profitable treatments. Customers only observe records of experts' past actions. If experts are homogeneous there exists an equilibrium where experts always choose the customer's preferred treatment (play truthfully). Experts are incentivized with the promise of future business: new customers tend to choose experts who performed less profitable treatments in the past. If expert payoffs are private information, experts can never always be truthful. But sufficiently patient experts may be truthful almost always. (JEL C73, D82)

  July 28, 2013   doi: 10.1111/ecin.12035   open full text
• U.S. Credit Unions: Survival, Consolidation, And Growth.
  John Goddard, Donal Mckillop, John O. S. Wilson.
  Economic Inquiry. July 05, 2013
  This study uses hazard function estimations and time‐series and cross‐sectional growth regressions to examine the impact of exit through merger and acquisition (M&A) or failure, and internally generated growth, on the firm‐size distribution within the U.S. credit union sector. Consolidation through M&A was the principal cause of a reduction in the number of credit unions, but impact on concentration was small. Divergence between the average internally generated growth of smaller and larger credit unions was the principal driver of the rise in concentration. (JEL G21)

  July 05, 2013   doi: 10.1111/ecin.12032   open full text
• Surviving Credit Market Competition*.
  Nicola Cetorelli.
  Economic Inquiry. July 05, 2013
  Empirical studies have documented that improvements in credit supply have important effects on entry in nonfinancial industries. This article shows that changes in credit supply conditions have much deeper effects on firms' population dynamics, well above and beyond the experience of entry. I explore the hypothesis that changes in credit supply have important effects on the demand side as well. I conjecture that when financial capital is difficult to obtain, while fewer firms may enter, those entering are drawn from a population with a better distribution of entrepreneurial quality. In an environment where financial capital is easily obtainable instead, the population of loan applicants changes as well, including those in a tougher environment who would not have tried entrepreneurship in the first place. These changes in the population of applicants imply significant effects on firms' life expectancy profile, and these effects are heterogeneous across firms of different vintage. Modifications in life expectancy are likely to affect firms' incentives in undertaking future capital investment and likewise investments in technological innovation. Hence, these changes in overall firms' population dynamics characterize an explicit mechanism through which finance can affect real economic activity. (JEL G21, L11, L16)

  July 05, 2013   doi: 10.1111/ecin.12033   open full text
• Deterrence, Preemption, And Panic: A Common‐Enemy Problem Of Terrorism.
  Satya P. Das, Prabal Roy Chowdhury.
  Economic Inquiry. July 05, 2013
  A game‐theoretic analysis of terrorism examines interactions between a terrorist organization and multiple target countries. It considers both preemption and deterrence as counter‐terrorist policies. Damage from terror includes material costs and resultant fear. Fear effects lead to different equilibria and implications for counter‐terrorism policies. The model identifies conditions under which greater preemption may be the rational response to an increase in terrorism, that is, it analyzes the merit of the dictum “offense is the best defense.” It also examines the characteristics of cooperative behavior among target countries in dealing with the threat of terrorism. (JEL C72, D74, F52, F53, H41)

  July 05, 2013   doi: 10.1111/ecin.12034   open full text
• Caps In Sequential Contests.
  Reut Megidish, Aner Sela.
  Economic Inquiry. July 05, 2013
  We study a sequential two‐stage all‐pay auction with two identical prizes. In each stage, the players compete for one prize and each player can win either one or two prizes. The designer may impose a cap on the players' bids in each of the stages. We analyze the equilibrium in this sequential all‐pay auction with bid caps and show that capping the players' bids is profitable for a designer who wishes to maximize the players' expected total bid. (JEL D44, D82, J31, J41)

  July 05, 2013   doi: 10.1111/ecin.12031   open full text
• Is There A Physician Peer Effect? Evidence From New Drug Prescriptions.
  Muzhe Yang, Hsien‐Ming Lien, Shin‐Yi Chou.
  Economic Inquiry. June 13, 2013
  We investigate whether and how physicians' prescriptions of a new drug are influenced by their colleagues in the same hospital during shared working time. We use longitudinal data of physicians who prescribed antipsychotic drugs for schizophrenia patients in Taiwan between 1997 and 2010. We find that peer effects are small, but stronger among physicians of similar age and among those sharing a longer, larger, or more stable group. Peer effects are also stronger when drugs are newly introduced. We also find that peer effects are more likely to be overestimated using fixed‐effect models than using first‐difference models. (JEL D01, D83, I10)

  June 13, 2013   doi: 10.1111/ecin.12022   open full text
• Tax Rates, Governance, And The Informal Economy In High‐Income Countries.
  Zoë Kuehn.
  Economic Inquiry. June 13, 2013
  Approximately 16.7% of output in high‐income OECD (Organisation for Economic Cooperation and Development) countries is produced informally. I present a model economy where entrepreneurs decide how much of their production to keep informal. Informality carries a risk of getting caught, taxed, and fined. Results from a model with differences in tax rates alone only agree to approximately 23% with data on informality. Taking into account both governance quality and tax rates, agreement between the model's results and data increases to 72%. A policy experiment raising governance quality in Greece, Italy, Spain, and Portugal to Finnish standards reduces informality by 13 percentage points. (JEL E26, H26, J24)

  June 13, 2013   doi: 10.1111/ecin.12021   open full text
• The Evolution Of The Scientific Productivity Of Highly Productive Economists.
  Raquel Carrasco, Javier Ruiz‐Castillo.
  Economic Inquiry. June 13, 2013
  This paper studies the evolution of research productivity of a sample of economists working in the best 81 departments in the world in 2007. The main novelty is that, in so far as a productivity distribution can be identified with an income distribution, we measure productivity mobility in a dynamic context using an indicator inspired in an income mobility index suggested by Fields (2010) for a two‐period world. Productivity is measured in terms of publications, weighted by the citation impact of the journals where each article is published in the periodical literature. We study the evolution of average productivity, productivity inequality, the extent of rank reversals, and productivity mobility for seven cohorts, as well as the population as a whole. We offer new evidence confirming previous results about the heterogeneity of the evolution of productivity for top and other researchers. However, the major result is that—contrary to what was expected—for our sample of very highly productive scholars the effect of rank reversals between the two periods on overall productivity mobility offsets the effect of an increase in productivity inequality from the first to the second period in the youngest five out of seven cohorts. (JEL A11, A12, B41, D63, I32)

  June 13, 2013   doi: 10.1111/ecin.12028   open full text
• Motivation Crowding In Real Consumption Decisions: Who Is Messing With My Groceries?
  Grischa Perino, Luca A. Panzone, Timothy Swanson.
  Economic Inquiry. June 07, 2013
  We present evidence of crowding out of intrinsic motivation in real purchasing decisions from a field experiment in a large supermarket chain. We compare three instruments, a label, a subsidy, and a neutral price change, in their ability to induce consumers to switch from dirty to clean products. Interestingly, a subsidy framed as an intervention is less effective than either a label or a neutrally framed price change. We argue that this provides a new explanation for crowding behavior: consumers are resistant to having the line of demarcation between public and private decision making moved in either direction. (JEL C93, Q18, Q54, Q58, H23, H41)

  June 07, 2013   doi: 10.1111/ecin.12024   open full text
• Consolidating The Evidence On Income Mobility In The Western States Of Germany And The United States From 1984 To 2006.
  Gulgun Bayaz‐Ozturk, Richard V. Burkhauser, Kenneth A. Couch.
  Economic Inquiry. June 07, 2013
  The cross‐national intragenerational literature has often analyzed income mobility within short time periods over which mobility might reasonably be thought of as invariant. Here, we argue that a great social transformation—German reunification—abruptly and permanently altered mobility. Using standard measures (with panel data for the western states of Germany and the United States) over the period 1984–2006, we find the conventional result that income mobility is greater in Germany. But when we cut the data into 5‐year windows, we find that income mobility declines significantly over the years immediately following reunification in Germany but not in the United States, using both measures. (JEL J1, J6)

  June 07, 2013   doi: 10.1111/ecin.12025   open full text
• Allocating Infection: The Political Economy Of The Swine Flu (H1 N1) Vaccine.
  Matt E. Ryan.
  Economic Inquiry. June 07, 2013
  Previous research has isolated the effect of “congressional dominance” in explaining bureaucracy‐related outcomes. This analysis extends the concept of congressional dominance to the allocation of H1N1, or swine flu, vaccine doses. States with Democratic United States Representatives on the relevant House oversight committee received roughly 60,000 additional doses per legislator during the initial allocation period, though this political advantage dissipated after the first 3 weeks of vaccine distribution. As a result political factors played a role in determining vaccine allocation only when the vaccine was in particularly short supply. At‐risk groups identified by the Centers for Disease Control (CDC), such as younger age groups and first responders, do not receive more vaccine doses, and in fact receive slightly fewer units of vaccine. (JEL D72, D73, I18)

  June 07, 2013   doi: 10.1111/ecin.12023   open full text
• Do Higher Tobacco Taxes Reduce Adult Smoking? New Evidence Of The Effect Of Recent Cigarette Tax Increases On Adult Smoking.
  Kevin Callison, Robert Kaestner.
  Economic Inquiry. June 07, 2013
  There is a general consensus among policymakers that raising tobacco taxes reduces cigarette consumption. However, evidence that tobacco taxes reduce adult smoking is relatively sparse. In this paper, we extend the literature in two ways: using data from the Current Population Survey Tobacco Use Supplements we focus on recent, large tax changes, which provide the best opportunity to empirically observe a response in cigarette consumption, and employ a novel paired difference‐in‐differences technique to estimate the association between tax increases and cigarette consumption. Estimates indicate that, for adults, the association between cigarette taxes and either smoking participation or smoking intensity is negative, small, and not usually statistically significant. Our evidence suggests that increases in cigarette taxes are associated with small decreases in cigarette consumption and that it will take sizable tax increases, on the order of 100%, to decrease smoking by as much as 5%. (JEL I18, I12)

  June 07, 2013   doi: 10.1111/ecin.12027   open full text
• The Economics Of Aerobics.
  Kemper W. Moreland.
  Economic Inquiry. June 07, 2013
  This study presents a simple model that weighs the benefits and costs of aerobic exercise to the individual. The model assumes that adding years to life serves as the primary benefit of exercise, and that hours of exercise over a lifetime serve as the cost. Given previous estimates of individual rates of time preference this study finds that people act rationally when they choose to watch a track event rather than choose to run themselves. (JEL I1)

  June 07, 2013   doi: 10.1111/ecin.12026   open full text
• Corrigendum.
  
  Economic Inquiry. May 06, 2013
  There is no abstract available for this paper.

  May 06, 2013   doi: 10.1111/ecin.12030   open full text
• Corrigendum.
  
  Economic Inquiry. May 06, 2013
  There is no abstract available for this paper.

  May 06, 2013   doi: 10.1111/ecin.12029   open full text
• Optimal Soccer Strategies.
  Ricardo Manuel Santos.
  Economic Inquiry. April 23, 2013
  This paper examines soccer teams' strategic choices about the extent of offense/defense to adopt in competing with other teams. The sample is European Champions League group stage matches played between 1997–1998 and 2009–2010. We begin by developing a characterization of teams' strategies (extent of offense or defense) using principal component analysis. This is used to estimate the relationship between a team's probabilities of scoring and conceding goals and its chosen strategy. Knowing that relationship, it is then possible to derive a team's optimal strategy, and to study how this varies in different situations (such as playing at home or away). A comparison between optimal and actual strategy reveals that teams appear to adopt more defensive strategies than is optimal. A notable feature of our study is that we model a team as choosing a strategy at the start of each match and also at half time, thereby incorporating a dynamic element. (JEL C23, C72, L83, Z00)

  April 23, 2013   doi: 10.1111/ecin.12020   open full text
• Time Preference And The Distributions Of Wealth And Income.
  Richard M. H. Suen.
  Economic Inquiry. April 17, 2013
  This paper examines the connection between time preference heterogeneity and economic inequality in a deterministic environment. Specifically, we extend the standard neoclassical growth model to allow for (1) heterogeneity in consumers' discount rates, (2) direct preferences for wealth, and (3) human capital formation. The second feature prevents the wealth distribution from collapsing into a degenerate distribution. The third feature generates a strong positive correlation between earnings and capital income across consumers. A calibrated version of the model is able to generate patterns of wealth and income inequality that are very similar to those observed in the United States. (JEL D31, E21, O15)

  April 17, 2013   doi: 10.1111/j.1465-7295.2012.00509.x   open full text
• Persistence Of Politicians And Firms' Innovation.
  Giorgio Bellettini, Carlotta Berti Ceroni, Giovanni Prarolo.
  Economic Inquiry. April 10, 2013
  We empirically investigate whether the persistence of politicians in political institutions affects the innovation activity of firms. We use 12,000 firm‐level observations from three waves of the Italian Observatory over Small and Medium Enterprises, and introduce a measure of political persistence defined as the average length of individual political careers in political institutions of Italian municipalities. Using death of politicians as an exogenous source of variation of political persistence, we find a robust negative relation between political persistence and the probability of process innovation. This finding is consistent with the view that political stability may hinder firms' incentive to innovate to maintain their competitiveness, as long as they can extract rents from long‐term connections with politicians. (JEL D22, D72, O31)

  April 10, 2013   doi: 10.1111/ecin.12015   open full text
• Leadership By Example In The Weak‐Link Game.
  Edward Cartwright, Joris Gillet, Mark Van Vugt.
  Economic Inquiry. April 04, 2013
  We investigate the effects of leadership in a four‐player weak‐link game. A weak‐link game is a coordination game with multiple Pareto‐ranked Nash equilibria. Because the more efficient equilibria involve a degree of strategic uncertainty groups typically find it difficult to coordinate on more efficient equilibria. We wanted to see whether leadership by example, in the form of one player acting publicly before the rest of the group, could help groups do better. Our results suggest that leadership can increase efficiency but is far from being a guarantee of success. Specifically, in a significant number of groups we observed successful leadership and increased efficiency, but in most groups efficiency was low despite the efforts of leaders. We did not find any difference between voluntary leaders and leaders that are randomly assigned. (JEL C72, H41)

  April 04, 2013   doi: 10.1111/ecin.12003   open full text
• Exchange Rate Regimes And Fiscal Discipline: The Role Of Capital Controls.
  Guillermo Vuletin.
  Economic Inquiry. April 04, 2013
  How do exchange rate regimes influence fiscal discipline? This important question has typically been addressed exploiting the classic dichotomy of fixed versus flexible exchange rate regimes assuming perfect capital mobility. However, the role of capital controls cannot be neglected, particularly in developing countries. This paper analyzes the effects of capital controls on fiscal performance by focusing on dual exchange rate regimes. In a model in which the fiscal policy is endogenously determined by a nonbenevolent fiscal authority, dual regimes induce politicians to have higher fiscal deficits than under fixed and flexible regimes operating under perfect capital mobility. The model also shows this effect increases as fiscal authorities become more impatient. Dynamic panel regressions confirm that dual regimes lead to higher fiscal deficits than fixed and flexible regimes operating under unified rates. Using a dummy for pre‐electoral year as an indicator of fiscal authorities' shortsightedness, we also confirm that dual exchange rate has a more adverse effect on fiscal deficits as the authorities become more impatient. (JEL E50, E60, F31, F41)

  April 04, 2013   doi: 10.1111/ecin.12019   open full text
• Inefficiency As A Strategic Device In Group Contests Against Dominant Opponents.
  Martin Kolmar, Andreas Wagener.
  Economic Inquiry. April 03, 2013
  Contests between groups are prone to intra‐group externalities (free‐riding). Yet, costless incentive schemes that entirely avoid free‐riding within a group might be undesirable, both individually and socially. In contests between two groups, a relatively weak (i.e., small or unproductive) group will optimally not implement them because they compound differences in strength between groups. If the groups are of relatively similar strengths, they are both worse off when they rein in their intra‐group externalities compared to a situation where they do not. If groups' strengths differ sufficiently, the relatively strong group benefits at the expense of the relatively weak one. (JEL Z13, D72, N40, D74)

  April 03, 2013   doi: 10.1111/ecin.12012   open full text
• The Role Of Monitoring Of Corruption In A Simple Endogenous Growth Model.
  Raffaella Coppier, Mauro Costantini, Gustavo Piga.
  Economic Inquiry. March 31, 2013
  This article analyzes the relationship between economic growth and the monitoring of corruption. In our theoretical model, we derive a nonlinear relationship between the level of monitoring and economic growth, as well as between corruption and economic growth. At low monitoring levels, the economy experiences widespread corruption and medium growth rates, whereas no corruption occurs at intermediate monitoring levels, but low growth rates are recorded. At high monitoring levels, no corruption takes place and high growth rates are observed. The model is estimated using a dynamic panel data approach for Italy. Empirical results support the theoretical model. (JEL C33, D73, K42)

  March 31, 2013   doi: 10.1111/ecin.12007   open full text
• Three‐Player Trust Game With Insider Communication.
  Roman M. Sheremeta, Jingjing Zhang.
  Economic Inquiry. March 28, 2013
  We examine behavior in a three‐player trust game in which the first player may invest in the second and the second may invest in the third. Any amount sent from one player to the next is tripled. The third player decides the final allocation among three players. The baseline treatment with no communication shows that the first and second players send significant amounts and the third player reciprocates. Allowing insider communication between the second and the third players increases cooperation between these two. Interestingly, there is an external effect of insider communication: the first player who is outside communication sends 54% more and receives 289% more than in the baseline treatment. As a result, insider communication increases efficiency from 44% to 68%. (JEL C72, C91, D72)

  March 28, 2013   doi: 10.1111/ecin.12018   open full text
• Drawn Into Violence: Evidence On “What Makes A Criminal” From The Vietnam Draft Lotteries.
  Jason M. Lindo, Charles Stoecker.
  Economic Inquiry. March 24, 2013
  Draft lottery number assignment during the Vietnam Era provides a natural experiment to examine the effects of military service on crime. Using exact dates of birth for inmates in state and federal prisons in 1979, 1986, and 1991, we find that draft eligibility increases incarceration for violent crimes but decreases incarceration for nonviolent crimes among whites. This is particularly evident in 1979, where two‐sample instrumental variable estimates indicate that military service increases the probability of incarceration for a violent crime by 0.34 percentage points and decreases the probability of incarceration for a nonviolent crime by 0.30 percentage points. We conduct two falsification tests, one that applies each of the three binding lotteries to unaffected cohorts and another that considers the effects of lotteries that were not used to draft servicemen. (JEL K42, H56)

  March 24, 2013   doi: 10.1111/ecin.12001   open full text
• Is Physical Investment The Key To China's Growth Miracle?
  Diego Romero‐ávila.
  Economic Inquiry. March 24, 2013
  This paper applies Jones' test for the empirical validity of AK‐type models to the Chinese economy over the period 1952–2006 (Jones C. I., Quarterly Journal of Economics, 110, 1995a, 495–525). We aim to establish whether large permanent movements in the physical investment rate cause permanent movements in output growth. The evidence indicates that the one‐sector AK model cannot be rejected. We also find that augmenting the model to allow for transitional dynamics—via imbalances in factor endowments, structural transformation, and R&D‐based technology transfer—does a better job in describing China's growth dynamics than the basic AK model. (JEL C22, O41, O47)

  March 24, 2013   doi: 10.1111/ecin.12005   open full text
• What's So Funny About Making Monetary Policy?
  Kevin W. Capehart.
  Economic Inquiry. March 24, 2013
  During their meetings, the members of the Federal Open Market Committee (FOMC) make monetary policy, but they also make each other laugh. This article studies the amount of laughter elicited by members of the FOMC during their meetings. The study finds that a member elicits more laughter if he or she expects higher inflation, other things being equal. This finding suggests that members may use humor to cope with the threat of inflation. (JEL E52, E58, C23)

  March 24, 2013   doi: 10.1111/ecin.12004   open full text
• Stereotype Threat And The Student‐Athlete.
  Thomas S. Dee.
  Economic Inquiry. March 24, 2013
  Achievement gaps may reflect the cognitive impairment thought to occur in evaluative settings (e.g., classrooms) where a stereotyped identity is salient (i.e., stereotype threat). This study presents an economic model of stereotype threat that reconciles prior evidence on how student effort and performance are influenced by this social‐identity phenomenon. This study also presents empirical evidence from a framed field experiment in which students at a selective college were randomly assigned to a treatment that primed their awareness of a negatively stereotyped identity (i.e., student‐athlete). This social‐identity manipulation reduced the test‐score performance of athletes relative to non‐athletes by 12%. These negative performance effects were concentrated among male student‐athletes who also responded to the social‐identity manipulation by attempting to answer more questions. (JEL I2, C9, D0)

  March 24, 2013   doi: 10.1111/ecin.12006   open full text
• International Supply Chains And The Volatility Of Trade.
  Benjamin Bridgman.
  Economic Inquiry. March 24, 2013
  Were the large import fluctuations around the 2007–2009 recession because of increasing trade volatility? I show that import volatility relative to gross domestic product (GDP) increased in the 2000s and examine whether vertical specialization (VS) trade can explain this increase. I develop and calibrate a model of VS trade that generates most of the observed increase in relative import volatility from the 1960s to the 2000s. The increase is because of GDP's shift to less volatile services production. VS trade has a negligible impact. VS causes trade to fall more in recession but also increases the share of output that is traded, leaving volatility unaffected. It increases volatility by shifting trade to more volatile sectors, but this effect is quantitatively small. (JEL E3, F1)

  March 24, 2013   doi: 10.1111/ecin.12009   open full text
• Spending Wisely? How Resources Affect Knowledge Production In Universities.
  Alexander Whalley, Justin Hicks.
  Economic Inquiry. March 24, 2013
  Every year billions of dollars are spent on research grants to produce new knowledge in universities. However, as grants may also affect other research funding, the effects of financial resources on knowledge production remain unclear. To uncover how financial resources affect knowledge production, we study the effects of research spending itself. Utilizing the legal constraints on university spending from an endowment we develop an instrumental variables approach. Our approach instruments for university research spending with time‐series variation in stock prices interacted with cross‐sectional variation in initial endowment market values for research universities in the United States. Our analysis reveals that research spending has a substantial positive effect on the number of papers produced, but not their impact. We also demonstrate that research spending effects are quite similar at private and public universities. (JEL H5, I2, O3)

  March 24, 2013   doi: 10.1111/ecin.12011   open full text
• Your Right Arm For A Publication In Aer?
  Arthur E. Attema, Werner B.F. Brouwer, Job Van Exel.
  Economic Inquiry. March 24, 2013
  The time tradeoff (TTO) method is popular in medical decision making for valuing health states. We use it to elicit economists' preferences for publishing in top economic journals and for living without limbs. The economists value journal publications highly and have a clear preference among them, with the American Economic Review (AER) the most preferred. Their responses imply they would sacrifice more than half a thumb for an AER publication. These TTO results are consistent with ranking and willingness to pay results, and indicate that journal preferences are not entirely determined by impact factors or by expectations of a salary increase following a publication in a prestigious journal. (JEL A10, B41, I10)

  March 24, 2013   doi: 10.1111/ecin.12013   open full text
• War Of Attrition: Evidence From A Laboratory Experiment On Market Exit.
  Ryan Oprea, Bart J. Wilson, Arthur Zillante.
  Economic Inquiry. March 24, 2013
  We report an experiment designed to study whether inefficient firms are systematically driven from overcrowded markets. Our data set includes a series of 3,800 wars of attrition of a type modeled by Fudenberg and Tirole in 1986. We find that exit tends to be efficient and exit times conform surprisingly well to point predictions of the model. Moreover, subjects respond similarly to implementations framed in terms of losses as they do to those framed in terms of gains. (JEL D21, L11, C92)

  March 24, 2013   doi: 10.1111/ecin.12014   open full text
• Why Do People Use Debit Cards: Evidence From Checking Accounts.
  Marc Anthony Fusaro.
  Economic Inquiry. March 24, 2013
  Debit cards are the fastest growing consumer payment method despite being more expensive and less versatile than credit cards. In this paper, we investigate some of the oft cited explanations for debit card use. Checking account data shows that debit card use is correlated with age, pay frequency, overdrafting, and ATM use, but not income, gender, crime, or expenditure. The data contain some signs that debit cards might be used as a method of spending restraint. (JEL D14, G21, L14)

  March 24, 2013   doi: 10.1111/ecin.12008   open full text
• Identifying Changes In The Spatial Distribution Of Crime: Evidence From A Referee Experiment In The National Football League.
  Carl Kitchens.
  Economic Inquiry. March 24, 2013
  Between the 2009–2010 and 2010–2011 seasons, the National Football League (NFL) repositioned one of its officials in order to prevent injuries among officials. This creates a quasi‐experiment for studying how a change in the extent of policing affects detection of offenses. Using play‐by‐play data from the 2009–2010 and 2010–2011 NFL season, I estimate how the detection of offensive holding changes when the positioning of an official changes. I find that there is approximately a 20 increase in the number of offensive holding penalties called after the NFL repositioned the official. Penalties called on defensive linemen fell as a result of the repositioning. Overall, there was no change in the total number of penalties called. Using the estimated change in the probability of a penalty, I estimate the probability of an official calling a penalty. I infer that NFL officials detect approximately 60% of crimes committed on the field. (JEL K4, Z0, D0)

  March 24, 2013   doi: 10.1111/ecin.12016   open full text
• The Effect Of Abortion Legalization On Childbearing By Unwed Teenagers In Future Cohorts.
  Serkan Ozbeklik.
  Economic Inquiry. March 24, 2013
  This article examines the long‐term impact of legalized abortion on childbearing by unwed teenagers in the United States. I find that the 1970 legalization of abortion in the repeal states led to about a 6% reduction in unwed childbearing rates for white women aged 15–20 who were born in these states immediately after abortion became legal. I find a larger long‐term impact for African‐American women of the same ages: a 7.5%–13% reduction in unwed childbearing. My estimates are smaller and not as precise for the effect of Roe v. Wade. This outcome is not surprising given that I am able to estimate only a potential lower bound of the effect on unwed childbearing rates. On the other hand, when I estimated a Difference‐in‐Difference regression for the non‐repeal states assuming that there was no national trend that affected the childbearing behavior of the treatment age groups and their respective control age groups separately, I found that the true effect of Roe v. Wade on childbearing by unwed teenagers was about an 11% and 3% reductions for white and African‐American teenagers, respectively. (JEL J13, I18)

  March 24, 2013   doi: 10.1111/ecin.12017   open full text
• Maternal Labor Supply And The Availability Of Public Pre‐K: Evidence From The Introduction Of Prekindergarten Into American Public Schools.
  Sean P. Sall.
  Economic Inquiry. March 21, 2013
  In the 1980s and 1990s, many states and districts began to provide funding for prekindergarten (PK) programs for the first time. This paper takes advantage of the staggered timing in program funding to investigate the effect that increased availability of PK programs has on the labor supply of mothers with 4‐year‐olds. I find that mothers with a 4‐year‐old and no younger children were significantly more likely to be in the labor force and employed once PK became available. Mothers with a 4‐year‐old and other younger children were also significantly more likely to be in the labor force and employed. (JEL I20, J01, J20)

  March 21, 2013   doi: 10.1111/ecin.12002   open full text
• The Habit Of Giving.
  Jonathan Meer.
  Economic Inquiry. March 21, 2013
  Many charitable organizations believe it is worthwhile to solicit very small donations, particularly from young people, because these gifts form a habit of giving which leads to larger donations in the future. Indeed, there is some evidence of a positive correlation between giving when young and giving when old. However, such a correlation, by itself, does not constitute evidence of habit formation. Using data on alumni contributions to a university, we assess whether the correlation is due to habit formation—true state dependence—or to unobservable factors such as affinity to the school. We further examine whether habits form by the mere act of giving or based on the amount given. We implement an instrumental variables approach using the fact that performance of the school's athletic teams and solicitation by one's former roommates generate shocks to giving while young that are plausibly uncorrelated with giving when older. There is strong evidence of habit formation on the extensive margin, but not in the amount given. This finding has important implications for fundraising strategies, charities' accounting practices, and tax policy. (JEL D64, D91, D12)

  March 21, 2013   doi: 10.1111/ecin.12010   open full text
• Within U.S. Trade And The Long Shadow Of The American Secession.
  Gabriel Felbermayr, Jasmin Gröschl.
  Economic Inquiry. January 10, 2013
  Using data from U.S. commodity flow survey, we show that the historical Union–Confederacy border lowers contemporaneous trade between U.S. states by about 13%. The finding is robust over econometric models, survey waves, or aggregation levels. Including contemporaneous controls, such as network or institutional variables, lowers the estimate only slightly. Historical variables, such as slavery, do not explain the effect. Adding U.S. states unaffected by the Civil War, we argue that the friction is not merely reflecting unmeasured North–South differences. Finally, the border effect is larger for differentiated than for homogeneous goods, stressing the potential role for cultural factors and trust. (JEL F15, N72, N92, Z10)

  January 10, 2013   doi: 10.1111/j.1465-7295.2012.00510.x   open full text
• The Hard Life Of The Social Planner.
  Simone Valente.
  Economic Inquiry. January 07, 2013
  Where the social planner, threatened by final producers and walled‐in by innovators, releases the representative consumer from the pillory, hires two anonymous referees, and convinces the Economics Minister that final firms' purchases of monopolistically produced intermediate inputs should be taxed, not subsidized, as long as output growth does not exhibit scale effects. This normative prescription hinges on an often neglected reallocation mechanism generated by the linear accumulation laws that eliminate scale effects in most endogenous growth models. (JEL O41, O31)

  January 07, 2013   doi: 10.1111/j.1465-7295.2012.00511.x   open full text
• School Quality And Information Disclosure: Evidence From The Housing Market.
  Paul Carrillo, Stephanie R. Cellini, Richard K. Green.
  Economic Inquiry. January 02, 2013
  In this article, we investigate the relationship between school quality and information disclosure in housing markets. When presented with the option of identifying their local public school in a real estate listing, we find that sellers with homes assigned to higher‐performing schools are more likely to provide this information. We find more evidence of selective disclosure in 2001–2002 than in 2006–2007, when the costs of gathering and disclosing information on school assignments and quality were lower. Furthermore, we find more evidence of strategic behavior among sellers of large single‐family units that presumably appeal to families with children. After controlling for school quality, information disclosure does not appear to affect housing prices. Taken together, our results support the findings of the education literature on the importance of school quality capitalization in residential real estate and they provide the first evidence of strategic information disclosure in housing markets. (JEL L15, I20, R31)

  January 02, 2013   doi: 10.1111/j.1465-7295.2012.00507.x   open full text
• Measuring Crack Cocaine And Its Impact.
  Roland G. Fryer, Paul S. Heaton, Steven D. Levitt, Kevin M. Murphy.
  Economic Inquiry. January 02, 2013
  Numerous social indicators turned negative for Blacks in the 1980s and rebounded a decade later. We explore whether crack cocaine explains these patterns. Absent a direct measure, we construct a crack prevalence index using multiple proxies. Our index reproduces spatial and temporal patterns described in ethnographic accounts of the crack epidemic. It explains much of the 1980s rise in Black youth homicide and more moderate increases in adverse birth outcomes. Although our index remains high through the 1990s, crack's deleterious social impact fades. Changes over time in behavior, crack markets, and the user population may have mitigated crack's damaging impacts. (JEL K42, J15, I30)

  January 02, 2013   doi: 10.1111/j.1465-7295.2012.00506.x   open full text
• Fiscal Decentralization And Economic Growth: Spending Versus Revenue Decentralization.
  Norman Gemmell, Richard Kneller, Ismael Sanz.
  Economic Inquiry. January 02, 2013
  This article examines whether the efficiency gains accompanying fiscal decentralization generate higher growth in more decentralized economies, applying pooled‐mean group techniques to a panel dataset of 23 Organization for Economic Co‐operation and Development (OECD) countries, 1972–2005. We find that spending decentralization has tended to be associated with lower economic growth while revenue decentralization has been associated with higher growth. Since OECD countries are substantially more spending than revenue decentralized, this is consistent with Oates' (1972) hypothesis that maximum efficiency gains require a close match between spending and revenue decentralization. It suggests reducing expenditure decentralization, and simultaneously increasing the fraction financed locally, would be growth‐enhancing. (JEL E62, H71, H72)

  January 02, 2013   doi: 10.1111/j.1465-7295.2012.00508.x   open full text
• On Gender Gaps And Self‐Fulfilling Expectations: Alternative Implications Of Paid‐For Training.
  Juan J. Dolado, Cecilia García‐Peñalosa, Sara De La Rica.
  Economic Inquiry. December 23, 2012
  This paper presents a model of self‐fulfilling expectations by firms and households which generates multiplicity of equilibria in pay and housework time allocation for ex‐ante identical spouses. Multiplicity arises from statistical discrimination exerted by firms in the provision of paid‐for training to workers, rather than from incentive problems in the labor market. Employers' beliefs about differences in spouses' reactions to housework shocks lead to symmetric (ungendered) and asymmetric (gendered) equilibria. We find that: (1) the ungendered equilibrium tends to prevail as aggregate productivity in the economy increases (regardless of the generosity of family aid policies), (2) the ungendered equilibrium could yield higher welfare under some scenarios, and (3) gender‐neutral job subsidies are more effective that gender‐targeted ones in removing the gendered equilibrium. (JEL J16, J70, J71)

  December 23, 2012   doi: 10.1111/j.1465-7295.2012.00485.x   open full text
• Trade Adjustment, Political Pressure, And Trade Protection Patterns.
  Yoto V. Yotov.
  Economic Inquiry. December 07, 2012
  This paper introduces trade adjustment considerations as active determinants of trade policy. Using novel U.S. data sets, I show that, despite their small monetary value, trade‐induced unemployment and trade‐adjustment costs can incite an incumbent politician to grant protection to an unorganized industry, even in the presence of political pressure by organized sectors. This finding complements the theoretical predictions from Grossman and Helpman (American Economic Review, 84, 1994, 833–50) who argue that the government should protect organized industries but should subsidize imports in unorganized sectors. (JEL D73, F13, F14, F16, J68)

  December 07, 2012   doi: 10.1111/j.1465-7295.2012.00504.x   open full text
• An Examination Of Linear And Nonlinear Causal Relationships Between Commodity Prices And U.S. Inflation.
  Renuka Mahadevan, Sandy Suardi.
  Economic Inquiry. December 07, 2012
  This article uses both linear and nonlinear causality tests to examine the causal relationships between changes in commodity prices and U.S. inflation. Prior to the Great Moderation, there is evidence that changes in commodity price indices linearly lead inflation. The stability of the causal relationship appears to vary over time with a stronger bivariate link established before the Great Moderation. Further, there is evidence of significant nonlinear causality from raw industrials and metals indices to inflation with most of this detected nonlinear relationship being captured using the Baba, Engle, Kraft, and Kroner asymmetric generalized autoregressive conditional heteroskedasticity model. This implies that the observed nonlinear Granger causality is largely driven by unanticipated shocks and volatility spillovers in the run‐up of commodity prices in late 2000. (JEL C18, C22, E31)

  December 07, 2012   doi: 10.1111/j.1465-7295.2012.00503.x   open full text
• A Century Of Human Capital And Hours.
  Diego Restuccia, Guillaume Vandenbroucke.
  Economic Inquiry. December 05, 2012
  An average person born in the United States in the second half of the 19th century completed 7 years of schooling and spent 58 hours a week working in the market. In contrast, an average person born at the end of the 20th century completed 14 years of schooling and spent 40 hours a week working. In the span of 100 years, completed years of schooling doubled and working hours decreased by 30%. What explains these trends? We consider a model of human capital and labor supply to quantitatively assess the contribution of exogenous variations in productivity (wage) and life expectancy in accounting for the secular trends in educational attainment and hours of work. We find that the observed increase in wages and life expectancy accounts for 80% of the increase in years of schooling and 88% of the reduction in hours of work. Rising wages alone account for 75% of the increase in schooling and almost all the decrease in hours in the model, whereas rising life expectancy alone accounts for 25% of the increase in schooling and almost none of the decrease in hours of work. In addition, we show that the mechanism emphasized in the model is consistent with other trends at a more disaggregate level such as the reduction in the racial gap in schooling and the decrease in the cross‐sectional dispersion in hours. (JEL E1, I25, J11, O4)

  December 05, 2012   doi: 10.1111/j.1465-7295.2012.00497.x   open full text
• The Effect Of Cadaveric Kidney Donations On Living Kidney Donations: An Instrumental Variables Approach.
  Jose M. Fernandez, David H. Howard, Lisa Stohr Kroese.
  Economic Inquiry. December 05, 2012
  Transplantation is notable for the degree to which resources are allocated via administrative rather than market mechanisms. However, non‐monetary incentives still permeate the system. Using instrumental variable regression, we estimate the substitution patterns between cadaveric and living kidney donations in the United States from 1988 to 2008. On average, a decrease of two to five cadaveric donations causes living kidney donations to increase by one. Disaggregating living donors into blood‐related and non‐blood‐related donors, the strongest effect is found among non‐blood‐related donors known to the organ recipient. A 1% increase of cadaveric donations decreases living donations from this group by 1.54%. (JEL D62, D64, I1)

  December 05, 2012   doi: 10.1111/j.1465-7295.2012.00500.x   open full text
• The Effects Of Increased Access To Emergency Contraception On Sexually Transmitted Disease And Abortion Rates.
  Christine Piette Durrance.
  Economic Inquiry. December 05, 2012
  In 2006, the Food and Drug Administration (FDA) approved access to emergency contraception through pharmacies without a prescription. Several states, however, had previously allowed pharmacy access to emergency contraception. In particular, Washington State was the first state to implement such a program in 1998. If emergency contraception is used as a substitute for a surgical abortion, then pharmacy access could reduce unintended pregnancy. Pharmacy access, however, could lead to an increase in risk taking, especially among teens or young adults, and hence lead to increased rates of sexually transmitted diseases. In this article, we use county‐level data as well as specific timing of changes in pharmacy access to consider the intended and unintended consequences of pharmacy access to emergency contraception in Washington. The results indicate that while county‐level access to emergency contraception was unrelated to trends in sexually transmitted diseases (STDs) and abortions before access changed, access afterwards led to a statistically significant increase in STD rates (gonorrhea rates), both overall and for females. We do not find, however, an impact of pharmacy access on abortion or birth rates. These results are robust to several specification tests (including use of Oregon counties as additional control counties) as well as several falsification tests. (JEL I1, I18, J13)

  December 05, 2012   doi: 10.1111/j.1465-7295.2012.00498.x   open full text
• Trade Costs And Trade Composition.
  CHRIS MILNER, DANNY McGOWAN.
  Economic Inquiry. December 02, 2012
  In this paper, we investigate whether countries' trade costs act like other national endowments by affecting the composition of countries' exports. Using an econometric approach that controls for endogeneity by accounting for potentially relevant omitted variables, we find strong evidence for a sample of 37 industrialized and transition countries that national trade costs systematically affect the composition of trade and can be viewed therefore as a source of comparative advantage. Industries located in countries with low trade costs capture significantly higher shares of world exports, where this effect is stronger in trade cost intensive industries. (JEL F11, F14)

  December 02, 2012   doi: 10.1111/j.1465-7295.2012.00496.x   open full text
• University Competition, Grading Standards, And Grade Inflation.
  Sergey V. Popov, Dan Bernhardt.
  Economic Inquiry. December 02, 2012
  We develop a model of strategic grade determination by universities distinguished by their distributions of student academic abilities. Universities choose grading standards to maximize the total wages of graduates, taking into account how the grading standards affect firms' productivity assessment and job placement. We identify conditions under which better universities set lower grading standards, exploiting the fact that firms cannot distinguish between “good” and “bad”“A’'s. In contrast, a social planner sets stricter standards at better universities. We show how increases in skilled jobs drive grade inflation, and determine when grading standards fall faster at better schools. (JEL I21)

  December 02, 2012   doi: 10.1111/j.1465-7295.2012.00491.x   open full text
• Differentiated Assets: An Experimental Study On Bubbles.
  Kenneth S. Chan, Vivian Lei, Filip Vesely.
  Economic Inquiry. December 02, 2012
  In this paper, we study if and how having two differentiated assets affects bubble formation. We consider differences in assets' intrinsic characteristics as well as trading regulations that help differentiate two otherwise identical assets. We find that, compared to trading regulations, differences in assets' intrinsic characteristics encourage more arbitrage across assets and thus help reduce mispricing significantly. We also find that short‐term speculation does not depend on how assets or markets are being differentiated. As a result, short‐term speculation cannot be used to explain why bubbles are smaller when two assets are intrinsically different than when they are not. (JEL C91, F34)

  December 02, 2012   doi: 10.1111/j.1465-7295.2012.00494.x   open full text
• A Clear And Present Minority: Heterogeneity In The Source Of Endowments And The Provision Of Public Goods.
  Robert J. Oxoby, John Spraggon.
  Economic Inquiry. December 02, 2012
  We conduct public goods experiments in which participant groups are heterogeneous in regards to the source of their endowments. We find that this dimension of heterogeneity significantly reduces contributions to the public good, yielding strong support for the Nash prediction of minimal contributions. These minimal contributions arise in environments in which there exists a clear minority in terms of source of endowments. We discuss these results in light of current research on the influence of heterogeneous populations on public goods provision and redistributive policies. (JEL C9, D63, H4, J15)

  December 02, 2012   doi: 10.1111/j.1465-7295.2012.00493.x   open full text
• Parental Earnings And Children's Well‐Being: An Analysis Of The Survey Of Income And Program Participation Matched To Social Security Administration Earnings Data.
  Bhashkar Mazumder, Jonathan M. V. Davis.
  Economic Inquiry. November 20, 2012
  We estimate the association between parental earnings and child well‐being using data from the Survey of Income and Program Participation matched to Social Security Administration earnings records. We use very large samples on a wide variety of measures of child well‐being that are also linked to long histories of parent earnings from administrative records. Consistent with previous studies, we find that the use of longer time averages of parent earnings leads to substantially higher estimated associations compared to using only a single year of parent earnings. Using 7‐year time averages of parent earnings, we show, for example, that a doubling of parent earnings is associated with a reduced probability of a teenager reporting being in poor health by close to 50% and a decrease in the likelihood of a child repeating a grade by 39%. We also examine how the associations vary by the timing of when parental earnings are received during childhood. We find suggestive evidence that parental earnings received during the child's school‐going years (ages 6 to 17) are more strongly associated with college enrollment and children's future earnings as adults than parent earnings received earlier or later in the child's life. (JEL J13, I1, I2)

  November 20, 2012   doi: 10.1111/j.1465-7295.2012.00490.x   open full text
• Endogenous Timing In Contests With Delegation.
  Kyung Hwan Baik, Jong Hwa Lee.
  Economic Inquiry. November 20, 2012
  We study two‐player contests in which each player hires a delegate, and the delegates decide endogenously when to expend their effort. First, we look closely at the delegates' decisions on when to expend their effort, given contracts between the players and the delegates, and look at the players' decisions on their contracts. Then, we compare the outcomes of the endogenous‐timing framework with those of the simultaneous‐move framework. We show that the higher‐valuation player offers her delegate greater contingent compensation than her opponent, the delegate of the higher‐valuation player chooses his effort level after observing his counterpart's, the equilibrium expected payoff of the delegate of the higher‐valuation player is greater than that of his counterpart, and economic rent for each delegate exists. We show that, in the endogenous‐timing framework, each player offers her delegate better contingent compensation, each delegate's expected payoff is greater, and each player's expected payoff is smaller, as compared with the simultaneous‐move framework. (JEL D72)

  November 20, 2012   doi: 10.1111/j.1465-7295.2012.00487.x   open full text
• Product Differentiation Under Congestion: Hotelling Was Right.
  Christian Ahlin, Peter D. Ahlin.
  Economic Inquiry. November 14, 2012
  We introduce negative network externalities—“congestion costs”—into H. Hotelling's (1929) model of spatial competition with linear transportation costs. For any firm locations on opposite sides of the midpoint, a pure strategy price equilibrium exists and is unique if congestion costs are strong enough relative to transportation costs. We analyze product differentiation and find that Hotelling's Principle of Minimum Differentiation comes closer to holding in the presence of congestion costs. The greater are congestion costs, the less differentiated products can be in (locationally symmetric) equilibrium. In fact, minimum differentiation comes arbitrarily close to holding depending on the magnitude of these costs relative to transportation costs. Intuitively, greater congestion effects stabilize competition at closer quarters, eliminating aggressive pricing equilibria. Thus, negative network externalities can play a significant role in product differentiation. (JEL D21, L15, R12)

  November 14, 2012   doi: 10.1111/j.1465-7295.2012.00489.x   open full text
• Pay Secrecy And Effort Provision.
  Daniele Nosenzo.
  Economic Inquiry. November 08, 2012
  Pay secrecy is often justified on the ground of concerns about the detrimental consequences of intra‐firm pay comparisons for work morale and performance. Surprisingly, however, there is only limited empirical evidence that the availability of pay comparison information is detrimental for effort provision. In this paper, I study pay comparison effects in a gift‐exchange game laboratory experiment where an employer is matched with two symmetric employees. I compare effort choices made by employees in a “pay secrecy” treatment and in two “public wages” treatments where employees are informed of the wage paid to the co‐worker. In one “public wages” treatment the employer can choose both wages she pays to the employees, while in the other treatment the wage paid to one employee is regulated exogenously. I show that pay disclosure can be detrimental for effort provision if employees are treated unequally. (JEL A13, C92, J31)

  November 08, 2012   doi: 10.1111/j.1465-7295.2012.00484.x   open full text
• Cooperation Spillovers And Price Competition In Experimental Markets.
  Timothy N. Cason, Lata Gangadharan.
  Economic Inquiry. November 08, 2012
  Firms often cooperate explicitly through activities such as research joint ventures, while competing in other markets. Cooperation in research and development can allow firms to internalize the external benefits of knowledge creation and increase the returns from research and development (R&D) expenditures. Such cooperation may spill over to facilitate collusion in the market, however, potentially lowering welfare and efficiency. This paper uses a laboratory experiment to examine if sellers successfully coordinate to fund a joint research project to reduce their costs, and how this collaboration affects their pricing behavior. The experiment includes control treatments with separate R&D cooperation and markets. Our results show that although participants usually cooperate when given an opportunity, cooperation is observed less frequently when they also compete in the market. Communication improves cooperation in all environments, particularly when the market is present. Nevertheless, the data provide no evidence of seller collusion in the market. (JEL D43, D71, H40, O3)

  November 08, 2012   doi: 10.1111/j.1465-7295.2012.00486.x   open full text