The effects of the take-option in dictator-game experiments: a comment on Engel’s (2011) meta-study

In this paper, we report a replication of Engel’s (Exp. Econ. 14(4):583–610, 2011) meta-study of dictator game experiments. We find Engel’s meta-study of dictator game experiments to be robust, with one important exception: the coding of the take-option (List in J. Polit. Econ. 115(3):482–493, 2007; Bardsley in Exp. Econ. 11(2):122–133, 2008; Cappelen et al. in Econ. Lett. 118(2):280–283, 2013). While Engel reports this as having no statistically significant effect, in our replications, we find an economically and statistically significant negative effect on giving in line with the relevant literature.     

Property Taxation, Capitalization, and the Economic Implications of Raising Property Taxes

This study applies a hedonic pricing model to provide further empirical evidence whether, in the spirit of Tiebout (Journal of Political Economy 64(1):416?C424, 1956), Oates (Journal of Political Economy 77(6):957?C971, 1969), and Tullock (Journal of Political Economy 79(5):913?C918, 1971), property taxes in particular have been capitalized into housing prices in the city of Savannah, Georgia housing market. There were sufficient data in this context to study a total of 2,888 single-family houses for the six-year period 2000?C2005; 591 of these houses were located in the Savannah Historic Landmark District. Estimating the model in semi-log form reveals (after allowing for a variety of factors, including 12 spatial variables, four of which are de facto Tiebout type variables) that the natural log of the real sales price of a single-family house in the city of Savannah environment was in fact negatively affected by the city and county property tax level. This study is prompted by the fact that city and county governments are facing serious financial challenges and are searching for viable revenue sources. Increasing property taxes is one of the potential revenue sources being considered by elected officials. In providing current evidence on the effects of property tax in particular and on the Tiebout hypothesis in general, we seek to alert city and state governments of the potential consequences and perils of property tax hikes.     

Lender deception as a response to moral hazard

The paper considers a principal–agent relationship between a borrower and lender based on a model from Bowles (Microeconomics: behavior, institutions, & evolution. Princeton University Press, Princeton, 2003). It expands the model by incorporating borrower collateral as an exogenous variable to partly assuage lender concerns about excessive risk, and a theory of lender deception is then developed. Deception is posited as a costly activity that effectively makes fraud undetectable and extracts the borrower’s economic rent arising from moral hazard despite the presence of third-party enforcement and borrower collateral. We identify under what conditions a lender may have sufficient incentives for employing deception and to what extent they would employ it. The likelihood of, and outcomes from, deception are compared between monopoly lenders those in competitive markets. The model suggests that competitive lenders have more incentive to deceive than a monopoly lender facing the same borrower.     

Do Balkan economies catch up with EU? New evidence from panel unit root analysis

This paper explores empirically the issue of income convergence for the Balkans over the period 1994–2011 and the investigation relies on income differentials from both the averages of the European Union’s-15 (EU-15) and the European Union’s-24 (EU-24) as well as within the Balkan group. The adopted methodology deploys the non stationary panel unit root framework to cope with the problem of limited sample providing more reliable insight and, in particular, the analysis uses the univariate and panel minimum Lagrange Multiplier (LM) unit root tests, suggested by Lee and Strazicich (2003, 2004) and Im et al. (2005), that accounts for one and two endogenously determined structural breaks. The overall evidence is in favor of catching up with the EU benchmark cases as well as in favor of convergence within the Balkan area. However, disparities for some countries are confirmed.     

The impact of science and technology parks on firms’ product innovation: empirical evidence from Spain

Science and Technology Parks (STP) have attracted considerable attention and public funds in recent years. However, the conclusions on their effectiveness remain mixed. This work evaluates the impact of STP on firm product innovation in the Spanish context, as an example of a less developed innovation system in which regional and national governments are prioritizing STP initiatives. This work draws on a large sample of firms provided by the Spanish Survey on Technological Innovation that is conducted annually by the National Statistical Institute. We explore alternative econometric methods to obtain average treatment effects for firms located in 22 Spanish STPs. Our results show that Spanish STPs have a strong and positive impact on the probability and amount of product innovation achieved by STP located firms. These results hold when the endogeneity of STP location is taken into account.     

Estimating the Markov-switching almost ideal demand systems: a Bayesian approach

Allias and Nichèle (Eur Rev Agric Econ, 34(4):517–538, 2007) proposed a Markov-switching almost ideal demand system (MS-AIDS) model by extending the idea of Hamilton (Econometrica, 57(2):357–384, 1989). In this paper, we propose a Bayesian estimation for MS-AIDS model and illustrate applicability of our proposed method. We then run two sets of simulation studies to confirm the validity of the proposed method. In the empirical study on the Japanese meat market, our Bayesian estimation improves the MSEs for all meat products over the ML estimation, while successfully capturing the regime shifts of meat demand coinciding with the timing of bovine spongiform encephalopathy cases in Japan and US.     

Bargaining over productivity and wages when technical change is induced: implications for growth, distribution, and employment

I study a model of growth and income distribution in which workers and firms bargain à la Nash (Econometrica 18(2):155–162, 1950) over wages and productivity gains, taking into account the trade-offs faced by firms in choosing factor-augmenting technologies. The aggregate environment resulting from self-interested, objective function-maximizing decision rules on wages, productivity gains, savings and investment, is described by a two-dimensional dynamical system in the employment rate and output/capital ratio. The economy converges cyclically to a long-run equilibrium involving a Harrod-neutral profile of technical change, a constant rate of employment of labor, and constant input shares. The type of oscillations predicted by the model is qualitatively consistent with the available data on the United States (1963–2003), replicates the dynamics found in earlier models of growth cycles such as Goodwin (A growth cycle, in C.H. Feinstein (ed). Socialism, Capitalism and Economic Growth. Cambridge University Press, Cambridge 1967. Cambridge University Press, Cambridge, 1967); Shah and Desai (Econ J 91:1006–1010, 1981); van der Ploeg (J Macroecon 9:1–12, 1987); Flaschel (J Econ: Zeitschrift für Nationalökonomie 44:63–69, 1984) and Sportelli (J Econ: Zeitschrift für Nationalökonomie 61(1):35–64, 1995), and can be verified numerically in simulations. Institutional change, as captured by variations in workers’ bargaining power, has a positive effect on the long-run rate of growth of output per worker but a negative effect on long-run employment. Economic policy can also affect the growth and distribution pattern through changes in the unemployment compensation, which also have a positive long-run impact on labor productivity growth but a negative long-run impact on employment. In both cases, employment can overshoot its new equilibrium value along the transitional dynamics.     

Further results on the number of non-zero eigenvalues of a dynamic linear Econometric Model

This comment reconsiders a problem, discussed some time ago in this journal, concerning the determination of the exact number of non-zero eigenvalues of an Econometric Model of the Federal Republic of Germany. See Wolters (1976), Uebe (1977) and Schoonbeek (1983). We demonstrate in a straightforward way, by using theoretical arguments, that the number of such eigenvalues is at most 7.     

Industry innovativeness,firm size,and entrepreneurship: Schumpeter Mark III?

Emphasizing the dynamics in economies and industries, Schumpeter points to entrepreneurs carrying out ‘new combinations’. His work, and in particular the Theory of Economic Development, is often interpreted as praising individual entrepreneurs setting up new firms to contribute to an industry’s innovativeness. This has come to be referred to as the Schumpeter Mark I perspective. Later, however, in his Capitalism, Socialism, and Democracy, Schumpeter has rather suggested that large incumbents are best positioned to contribute to an industry’s innovativeness (Schumpeter Mark II). In this discussion, however, the possibly different effects of structural as opposed to dynamic industry competitiveness is often not taken into account. In addition, the contribution of new and small firms to industry innovativeness are often conflated. Using New Product Announcements as a measure of innovation, we find that industries dominated by small firms prove consistently and significantly more innovative than industries where large firms dominate. Taking account of industries’ structural and dynamic levels of competition, we find that high existing and increasing levels of new firms entering an industry, exercising what Schumpeter called the ‘entrepreneurial function’, actually decrease industry innovativeness. We conclude that the contribution of small firms in terms of industry innovativeness is different from that of large as well as new firms, suggesting a Schumpeter Mark III perspective.     

Qualitative aspects of the Indian growth spurt of the 1980s

The Indian growth spurt of the 1980s has led DeLong (2003), Rodrik & Subramaniam (IMF Staff Papers 52(2):193–228, 2005) and Kohli (Economic and Political Weekly 41(14):1361–1370, 2006) to question the need for market reforms in the 1990s and the supporters of liberalization to argue that it was the result of piecemeal liberalization. Both sides of this debate focus exclusively on the quantitative aspects of the high growth while ignoring its underlying quality. This paper analyzes two aspects of the quality of growth during the 1980s. First, it considers whether the increases in production were concentrated in goods far removed from mass consumption and second, it analyzes certain characteristics of three consumer goods that serve as an indicator of their quality.     

Evolutionary economics and the case for a constitutional libertarian paternalism—a comment on Martin Binder, “should evolutionary economists embrace libertarian paternalism?”

In his article “Should evolutionary economists embrace libertarian paternalism?”(Journal of Evolutionary Economics 24(3), 2014, 515–539) Martin Binder discusses the pros and cons of “libertarian paternalism” (LP) from an explicitly evolutionary viewpoint, concluding that as a general rule, evolutionary economists should be cautious regarding this new and highly influential policy approach. In this comment I argue that Binder starts from an incomplete model of the institutional status quo and neglects an obvious alternative to the standard variant of LP, namely, a constitutionally constrained LP. Most of Binder’s objections do not apply with equal force to such a refined variant of LP.     

Understanding the culture of markets: A reflection

This essay examines Virgil Storr’s (2013) Understanding the Culture of Markets, particularly the relationship between cultures and constitutions and the particulars of the ideal-typical ‘spirit’ of capitalism. Culture cannot be viewed as a constitution, I argue, because of fundamental differences between the two types of guidance to conduct, both for the actors within them and the researchers studying them. I also consider possibly conflicting interpretations of the idea of the animating spirit(s) of a market in the context of Storr’s example of the economic culture of the Bahamas.     

Geography, institutions, and the making of comparative development

While the direct impact of geographic endowments on prosperity is present in all countries, in former colonies, geography has also affected colonization policies and, therefore, institutional outcomes. Using non-colonized countries as a control group, I re-examine the theories put forward by La Porta et al. (J Law Econ Org 15(1):222–279, 1999 and Acemoglu et al. (Am Econ Rev 91(5), 1369–1401, 2001. I find strong support for both theories, but also evidence that the authors’ estimates of the impact of colonization on institutions and growth are biased, since they confound the effect of the historical determinants of institutions with the direct impact of geographic endowments on development. In a baseline estimation, I find that the approach of Acemoglu et al. (2001) overestimates the importance of institutions for economic growth by 28 %, as a country’s natural disease environment affected settler mortality during colonization and also has a direct impact on prosperity. The approach of La Porta et al. (1999) underestimates the importance of colonization-imposed legal origin for institutional development by 63 %, as Britain tended to colonize countries that are remote from Europe and thus suffer from low access to international markets.     

Definitions of ambiguous events and the smooth ambiguity model

We examine a variety of preference-based definitions of ambiguous events in the context of the smooth ambiguity model. We first consider the definition proposed in Klibanoff et?al. (Econometrica 73(6):1849?C1892, 2005) based on the classic Ellsberg two-urn paradox (Ellsberg Q J Econ 75:643?C669, 1961) and show that it satisfies several desirable properties. We then compare this definition with those of Nehring (Math Soc Sci 38(2):197?C213, 1999), Epstein and Zhang (Econometrica 69:265?C306, 2001), Zhang (Econ Theory 20:159?C181, 2002), and Ghirardato and Marinacci (J Econ Theory 102:251?C289, 2002). Within the smooth ambiguity model, we show that Ghirardato and Marinacci (J Econ Theory 102:251?C289, 2002) would identify the same set of ambiguous and unambiguous events as our definition while Epstein and Zhang (Econometrica 69:265?C306, 2001) and Zhang (Econ Theory 20:159?C181, 2002) would yield a different classification. Moreover, we discuss and formally identify two key sources of the differences compared to Epstein and Zhang (Econometrica 69:265?C306, 2001) and Zhang (Econ Theory 20:159?C181, 2002). The more interesting source is that these two definitions can confound non-constant ambiguity attitude and the ambiguity of an event.     

Inequality aversion and separability in social risk evaluation

This paper examines how to satisfy “independence of the utilities of the dead” (Blackorby et al. in Econometrica 63:1303–1320, 1995; Bommier and Zuber in Soc Choice Welf 31:415–434, 2008) in the class of “expected equally distributed equivalent” social orderings (Fleurbaey in J Polit Econ 118:649–680, 2010) and inquires into the possibility to keep some aversion to inequality in this context. It is shown that the social welfare function must either be utilitarian or take a special multiplicative form. The multiplicative form is compatible with any degree of inequality aversion, but only under some constraints on the range of individual utilities.     

A competitive equilibrium for a warm-glow economy

The warm-glow model (Andreoni in J Political Econ 97:1447–1458, 1989; Econ J 100:464–477, 1990) of public goods provision has received widespread interest, yet surprisingly most attention has focused on the voluntary contribution equilibrium of the model, and only very little attention has been devoted to the competitive equilibrium. In this paper, we introduce the concept of competitive equilibrium for a warm-glow economy (henceforth, warm-glow equilibrium) and establish both existence and welfare properties. The warm-glow equilibrium concept may prove to be very useful to the normative and positive theory of public goods provision. First, it is a price-based mechanism achieving efficient outcomes. Second, not only could the warm-glow equilibria outcomes serve as a point of reference to measure free-riding and welfare loss but also, as suggested by Bernheim and Rangel (Behavioral Economics and Its Applications, 2007), in large economies they may be approximated by Walrasian equilibria outcomes.     

Competition, knowledge, and local government

This paper applies the insights of Austrian economics to an important issue in local political economy. Basic economic theory holds that greater competition produces superior outcomes in private goods markets. The same should be true in the ??markets?? for the output of local government. Brennan and Buchanan (1977, 1980) show that interjurisdictional competition may serve as a potential restraint on the monopoly powers of local Leviathan and Tiebout (1956) shows that it may help lead to the production of efficient quantities of local public goods. However, other potential virtues of competition in the market for local collective goods have been largely ignored. This paper explores those other virtues as well as the neoclassical theoretical foundations of the Tiebout (1956) model, upon which much of this literature is based. This has public policy implications for local governments, which have taken on increased importance given the recent global movement towards more decentralized government.     

Niche products, generic products, and consumer search

We endogenize product design in a model of sequential search with random firm-consumer match value à la Wolinsky (Quart J Econ 96:493–511, 1986) and Anderson and Renault (RAND J Econ 30:719–735, 1999). We focus on a product design choice by which a firm can control the dispersion of consumer valuations for its product; we interpret low-dispersion products as “generic” and high-dispersion products as “nichy.” Equilibrium product design depends on a feedback loop: when reservation utility is high (low), the marginal customer’s match improves (worsens) with more nichy products, encouraging high (low) differentiation by firms. In turn, when firms offer more nichy products, this induces more intense search; depending on search costs, this could raise or lower consumers’ reservation utility. Remarkably, when the match distribution satisfies a hazard rate condition, firm and consumer interests align: equilibrium product design always adjusts to the level that maximizes utility. When this condition is not met, either multiple equilibria (one nichy, the other generic) or one asymmetric equilibrium (generic and nichy firms coexist) can arise; we argue that the former is more likely for common specifications of consumer preferences.     

Assessing the impact of Nigeria's naira depreciation on output and inflation

This research examined the impact of the 3 May 1999 tornado on the Oklahoma City labour market. We estimated time series models that allow for time-varying variance in employment growth. The models include intervention variables designed to capture the tornado's effect at initial impact as well as over the post-tornado period. In terms of total employment growth, the Oklahoma City Metropolitan Statistical Area (MSA) experienced an increase in employment growth and a reduction in labour market risk in the sample period following the tornado. The analysis also examined the effect of the weather event on eight industrial sectors. Five of eight sectors experienced significant decreases in labour market risk after the tornado. Our evidence suggests that Oklahoma City and surrounding communities that make up the Metropolitan Statistical Area survived the disaster without suffering any extended adverse labour market effects. Our results indicate that at least in the aggregate, the labour market improved.

“…?what has so often excited wonder, the great rapidity with which countries recover from a state of devastation; the disappearance, in a short time, of all traces of the mischiefs done by earthquakes, floods, hurricanes, and the ravages of war?…?all the inhabitants are ruined, and yet in a few years after, everything is much as it was before.”?–?J.S. Mill (1848 Mill, J. 1848. Principles of Political Economy, Edited by: Ashley, WJ. New York: A M Kelley Publishers. 1965 [Google Scholar])