Pollution and life expectancy: How environmental policy can promote growth

This article investigates the influence of environmental policy (EP) on growth in an AK-type growth model, when finite lifetime is introduced and the link between pollution and life expectancy (through the detrimental impact of pollution on health) is taken into account.Using an overlapping generations model à la Blanchard [Blanchard, O. (1985). Debt, deficits and finite horizon. Journal of Political Economy, 93:223-247], we demonstrate that finite lifetime introduces a “generational turnover effect” which modifies the influence of the EP on growth. Thus, when lifetime is finite and independent from pollution, we show that the “generational turnover effect” limits the detrimental impact of the EP on growth, if agents smooth their consumption over time. When pollution negatively influences life expectancy through health, we demonstrate that the “generational turnover effect” is magnified and that the EP and growth have an inverted U-shaped relationship in the steady-state. In this case, we show that the environmental policy is more likely to promote growth (i.e. it stimulates growth for a wider range of environmental taxes) when the impact of pollution on health is important and/or public expenditures in health are low. Finally, using numerical simulations, we find that for the value of parameters that we have chosen, the EP will be more likely to promote growth when agents smooth consumption over time.     

Public debt and financial development

We examine the role of public debt in financial development. The literature has highlighted its supportive role through providing collateral and benchmark. We contrast this “safe asset” view to a “lazy banks” view: developing banking sectors that lend mainly to the public sector may develop more slowly, because it could make banks profitable but inefficient. Results from country-level and bank-level regressions are more supportive of the “lazy banks” view, but the “safe asset” view seems to play a role at moderate levels of public debt held by banks. There is also evidence of a harmful interaction between public debt and financial repression.     

Agency conflicts in the presence of random private benefits from project implementation

We study a contracting problem where a principal delegates the decision to implement a “project” to an agent who obtains private information about the value of the project before making the implementation decision. Moral hazard arises because the agent gets private random non-contractible benefits, or incurs private random non-contractible costs, if the project is implemented. This contracting problem is pervasive, when “project” and “benefits” are interpreted broadly.     

Minimum wage,on-the-job search and employment: On the sectoral and aggregate equilibrium effect of the mandatory minimum wage

We study the impact of a minimum wage in a segmented labor market in which workers are at different stages of their careers. At the end of a learning-by-doing period, workers paid the minimum wage quit “bad jobs” for better-paying “good jobs”, following an on-the-job search process with endogenous search intensity. A rise in the minimum wage reduces “bad jobs” creation and prompts workers to keep their “bad jobs” by reducing on-the-job search intensity. The ambiguous impact on unqualified employment replicates and explains the findings of several empirical studies. However, a minimum wage rise reduces overall employment and output.     

The role of strategic uncertainty in games: An experimental study of cheap talk and contracts in the Nash demand game

We utilise results from a human-subjects experiment to examine the connection between strategic uncertainty and outcomes in games. Our basic game is a Nash demand game where one player has an outside option available. A “chat” treatment allows bargainers to send cheap-talk messages prior to playing the basic game, and in a “contracts” treatment, they can additionally propose and accept binding contracts. We propose that strategic uncertainty comprises at least two facets: “coordination-type”, which is lower in the chat game than in the basic game, and “rationality-type”, which is lower in the contracts game than in the chat game. We find that both types of strategic uncertainty impact bargaining outcomes: moving from the basic game to the chat game, and thence to contracts, improves several aspects of outcomes, such as higher efficiency, less opting out and less under-demanding. Other results include a treatment effect on the types of agreements that are reached.     

Crime and punishment in the “American Dream”

We observe that countries where belief in the “American dream”(i.e., effort pays) prevails also set harsher punishment for criminals. We know that beliefs are also correlated with several features of the economic system (taxation, social insurance, etc). Our objective is to study the joint determination of these three features (beliefs, punitiveness and economic system) in a way that replicates the observed empirical patterns. We present a model where beliefs determine the types of contracts that firms offer and whether workers exert effort. Some workers become criminals, depending on their luck in the labor market, the expected punishment, and an individual shock that we call “meanness”. It is this meanness level that a penal system based on “retribution” tries to detect when deciding the severity of the punishment. We find that when initial beliefs differ, two equilibria can emerge out of identical fundamentals. In the “American” (as opposed to the “French”) equilibrium, belief in the “American dream” is commonplace, workers exert effort, there are high powered contracts (and income is unequally distributed) and punishments are harsh. Economists who believe that deterrence (rather than retribution) shapes punishment can interpret the meanness parameter as pessimism about future economic opportunities and verify that two similar equilibria emerge.     

Uniqueness of stationary equilibria in a one-dimensional model of bargaining

We prove uniqueness of stationary equilibria in a one-dimensional model of bargaining with quadratic utilities, for an arbitrary common discount factor. For general concave utilities, we prove existence and uniqueness of a “minimal” stationary equilibrium and of a “maximal” stationary equilibrium. We provide an example of multiple stationary equilibria with concave (nonquadratic) utilities.     

Modelling the fiscal reaction functions of the GIPS based on state-varying thresholds

We introduce non-linear fiscal reaction functions with endogenously estimated state-varying thresholds to capture the behaviour of fiscal policy authorities during “good” and “bad” times. These thresholds vary with the level of debt, the economic cycle and a financial pressure index.     

Superstition and “lucky” apartments: Evidence from transaction-level data

Using a sample of apartment transactions during 2004–2006 in Chengdu, China, we investigate the impact of superstitions in the Chinese real estate market. Numerology forms an important component of Chinese superstitious lore, with the numbers 8 and 6 signifying good luck, and the number 4 bad luck. We find that secondhand apartments located on floors ending with “8” fetch, on average, a 235 RMB higher price (per square meter) than on other floors. For newly constructed apartments, this price premium disappears due to uniform pricing of new housing units, but apartments on floors ending in an “8” are sold, on average, 6.9 days faster than on other floors. Buyers who have a phone number containing more “8”’s are more likely to purchase apartments in a floor ending with “8”; this suggests that at least part of the price premium for “lucky” apartments arises from the buyers’ superstitious beliefs.     

Evidence disclosure and verifiability

We explore the notion of “verifiability” by analyzing a simple model of evidence production in contractual relationships with complete information. We characterize implementability in terms of the existence and form of “hard evidence.” We provide results on maximal and minimal evidence production that are, respectively, necessary and sufficient for implementation. We briefly discuss the relevance of our results to actual legal institutions.     

Exploring whether behavior in context-free experiments is predictive of behavior in the field: Evidence from lab and field experiments in rural Sierra Leone

We use a sample of subsistence farmers in Sierra Leone as respondents to compare behavior in a context-free experiment (a standard public goods game) and behavior in the field (a real development intervention). There is no meaningful correlation in behavior across contexts. This casts doubt on the prospect of using lab experiments as “predictors” of behavior in real life.     

Intergenerational transmission of preferences

We propose a perfect empathy model of cultural transmission to capture the evolution of preferences in a population. Unlike existing imperfect empathy models, focusing on stable interior equilibria, we demonstrate that a corner outcome will eventuate. However, which corner outcome emerges is unknown, and depends on the interplay of “history” and “expectations”.     

The internet as an indicator of corruption awareness

We apply a standard specification of the causes of corruption to a large sample of countries to investigate the effect of internet awareness about corruption on prevalence and perceptions of corruption. The main hypothesis is that greater corruption awareness acts as a corruption deterrent. A unique data set of internet searches on Google and Yahoo is compiled using alternate variations of “corruption”, “bribery” and “country name” keywords to capture internet corruption awareness. Results show that internet hits about corruption per capita correlate negatively with corruption perceptions and corruption incidence. This finding generally holds for different specifications and other robustness checks.     

Voluntary formation of communities for the provision of public projects

In this paper we examine a group formation problem, where heterogeneous individuals partitioned themselves into communities, each choosing its own public project from the given space of feasible projects. The model is that of “horizontal product differentiation” where individuals display distinct preferences over the policy space. We consider the notion of “efficient” configuration that minimizes the total project-related costs and aggregate personalized costs of all individuals, and “sustainable” configurations, those are immune against breakaways by subgroups of individuals. Our main result is that, with a unidimensional project space and single-peaked personalized costs, every efficient partition is sustainable.     

Competing risk model for mobile phone service

Since the Korean government implemented the “Number Portability System” in the domestic mobile communications market, mobile communication companies have been striving to hold onto existing customers and at the same time to attract new customers. This paper presents a competing risk model that considers the characteristics of a customer in order to predict the customer's mean residual life under the “Number Portability System.” Competing causes for churning considered are pricing policy, quality of communication, and usefulness of service. It has been observed that the customers who pay more are less sensitive to pricing policy; younger people are less sensitive than older people to the change of the quality of communication; and women are more sensitive than men in terms of usefulness of service. We expect that the result of this study can be used as a guideline for effective management of mobile phone customers under the number portability system.     

Differentiating ambiguity and ambiguity attitude

The objective of this paper is to show how ambiguity, and a decision maker (DM)'s response to it, can be modelled formally in the context of a general decision model. We introduce a relation derived from the DM's preferences, called “unambiguous preference”, and show that it can be represented by a set of probabilities. We provide such set with a simple differential characterization, and argue that it is a behavioral representation of the “ambiguity” that the DM may perceive. Given such revealed ambiguity, we provide a representation of ambiguity attitudes. We also characterize axiomatically a special case of our decision model, the “α-maxmin” expected utility model.     

Technology transfer in the IT industry: A Korean perspective

Recently Korean Government announced ambitious IT strategy to establish Korea as one of leaders in world IT market. To implement this strategy, technology transfer from research lab to market should be successfully performed. This study is to identify factors influencing technology transfer and to examine contribution of these factors on success of technology transfer in Korean IT industry. Survey results show that technology project leaders evaluated “Concreteness of Technology” as the most influential factor for technology transfer, followed by “Communication Channels,” “Collaboration among Participants,” “Management Support,” “Government Support,” and “Incentives for Transfer.” Out of 135 technology transfer projects, respondents rated 33 projects as sustaining (28.44%), 38 as promoting (28.15%), 26 as demonstrating (19.26%), 27 in incubating (20.00%), and the remaining 7 in imaging stage (8.15%). This statistics means that 28.15% of technology transfer projects did not reach production stage. Regression analysis identifies that “Communication Channels,” “Management Support,” “Concreteness of Technology” “Sense of Common Purpose,” and “Awareness of Technology Transfer” were statistically significant in explaining success of technology transfer.     

A study on the relationship between technology diffusion and new product diffusion

This study investigates the relationship between “technology diffusion” and “new product diffusion”. We define “technology diffusion” as a knowledge spillover process, which is represented by patent citation, and “new product diffusion” as the spread of a new product that has been developed by the application of patented technology. To investigate the relationship between the two types of diffusion, we use patent citation data of code division multiple access (CDMA) technology and market sales data of mobile phones in South Korea for the analysis. The results show that the diffusion of technology through patent citation could be successfully explained by empirical analysis, for which the Bass diffusion model was used. Moreover, we can find out if technology diffusion can be the leading indicator of a new product's diffusion before its launching; in other words, before the commercialization of the patent.     

Spontaneous vs. policy-driven: The origin and evolution of the biotechnology cluster

The biotechnology industry is at the heart of the fast-growing knowledge-based economy. One of the distinguishing characteristics of this industry is clustering. A cluster, like an organism, experiences origin, growth, and decline/reorientation. Our study constructs a framework to analyze biotechnology clusters with different origins, “spontaneous” and “policy-driven”, through their life cycles. We use the Bay Area in the United States and Shanghai Zhangjiang Hi-Tech Park in China as two cases to represent spontaneous and policy-driven biotechnology clusters. This study fills the gap in the literature by comparing these two types of biotechnology clusters in an evolutionary perspective. The key success factors of both biotechnology clusters are their own human and financial capital, but they differ in their underlying processes for creating and sharing these resources. The most fundamental differences arise from the impact of entrepreneurship, social capital and network patterns on the cluster's configuration.     

Does a ‘non-committed’ government always generate lower social welfare than its ‘committed’ counterpart? Strategic trade policy when consumer surplus matters

We show that social welfare in the setup where the government lacks the full ability to commit to its trade policies may exceed the social welfare when the government possesses full commitment power if consumer surplus is part of the social welfare function. This is never the case in the standard, “third market” framework of strategic trade policy. We provide two examples in which consumer surplus matters: the “home market” and the “intra-industry trade” setup. The policy instruments under consideration are import tariffs and export subsidies and there are R&D spillovers from the domestic to the foreign firm.