Do consumers pay voluntarily? The case of online music

The paper analyses the payment behaviour of customers of the online music label Magnatune. Customers may pay what they want for albums, as long as the payment is within a given price range ($5–$18). Magnatune's comprehensive pre-purchase access facilitates music discovery and allows an informed buying decision setting it apart from conventional online music stores.On average customers pay $8.20, far more than the minimum of $5 and even higher than the recommended price of $8. We analyse the relationship between artists/labels and customers in online music. We consider social preferences, in particular concerns for reciprocity. The resulting sequential reciprocity equilibrium corresponds to the observed pattern of behaviour.We conclude that Magnatune's open contracts design can encourage people to make voluntary payments and may be a viable business option.     

Does the quality of institutions enhance savings? The case of Sub-Saharan Africa

Over the last three decades, there has been increasing disparity in savings across regions and income groupings globally. In this paper, we investigate whether the quality of institutions explains the saving disparities in Sub-Saharan Africa (SSA). Utilizing comprehensive panel data and spanning the period 1980–2015, we estimate a savings model using the two-step instrumental variable generalized method of moment (2SIV-GMM) estimator. Our results show that the impact of institutions on savings behaviour differs across regions and income groupings, and in SSA, in aggregate. We find that the level and growth of per capita income and terms of trade enhance savings whereas government consumption expenditure, financial sector development and the elderly dependency rate are savings impeding. The findings are robust to alternative model specification and highlight the importance of institutions in influencing savings behaviour in SSA.     

Do standards improve the quality of traded products?

We examine whether standards raise the quality of traded products. Matching a panel of French firm–product–destination export data with a data set on sanitary and phytosanitary measures and technical barriers to trade, we find that such quality standards enforced on products by destination countries: (i) favour the export probability of high-quality firms provided that their productivity is high enough, (ii) raise the export sales of high-productivity, high-quality firms at the expense of low-productivity and low-quality firms and (iii) increase the quality supplied by firms if their productivity is high enough. We then develop a simple new trade model under uncertainty about product quality in which heterogeneous firms can strategically invest in quality signalling to rationalize these empirical results on quality and selection effects.     

Do food standards affect the quality of EU imports?

This paper investigates the relationship between the diffusion of EU standards and product quality upgrading using highly disaggregated import data to the EU in the food industry. Results show that, on average, the diffusion of EU voluntary standards boosts the rate of quality upgrading. However, the results are heterogeneous when moving from primary to processed foods, and from ISO to non-ISO standards.     

Do external interventions work? The case of trade reform conditions in IMF supported programs

Trade reform conditions are common in IMF supported programs. Of the 99 countries that had IMF programs during 1993-2003, 77 had trade reform conditions in their programs. Since the WTO has not been found especially effective in promoting trade openness for most developing countries, it is of great interest to see if the IMF has been more effective as it combines carrots and sticks not available to the WTO. Yet, the effectiveness of these trade conditions has not been systematically studied. Using a unique dataset, this paper provides such an assessment. It finds that trade conditions are indeed associated with an increase in trade openness on average, but the effect comes mostly from countries that can be characterized by a high degree of “willingness to reform.”     

Is utility additive? The case of alcohol

By using the quantile regressions of earnings equation, we find that the educational wage premium is higher in industries with rapid technological change than in industries with slower technological change at every decile in the distribution of wage residuals. The wage premium associated with the technological change is mostly explained by the returns to workers' unobserved heterogeneities, which are correlated with education, rather than the rents of high-tech industries.     

Do the poor benefit from globalization regardless of institutional quality?

Despite significant progress towards the Millennium goals, more than one billion people live on less than 1.25 US dollars per day. Previous research suggests that globalization stimulates poverty reduction, but does not investigate what role institutions play in this relationship. Theoretically, globalization could act as either a complement or a substitute to institutional quality in reducing poverty. We find that the poverty-reducing effect of globalization is stronger when institutions are weak. In particular, increasing social globalization reduces poverty more when corruption is high and democratic accountability is low. Thus, globalization has the power to reduce poverty even in countries with low institutional quality.     

The cost of registering property: does legal origin matter?

There is a large literature that finds that common law countries perform better than civil law countries in various aspects of the institutional environment. This article extends these findings to another dimension of institutional quality??the cost of registering property. In a sample of 121 countries, we find that the cost of registering property is lower by 26 percent of the world average in common law compared with civil law countries, a result largely driven by differences in non-notary costs of registering property. We provide plausible explanations for these findings.     

Do national business cycles have an international origin?

This paper analyses a set of output data for 113 countries and identifies common sources of fluctuations, to estimate a world business cycle. We also analyze the multiplier effects of worldwide or global shocks and their implications for the persistence and amplitude of cyclical fluctuations. We find that a higher relative importance of global shocks leads to lower persistence and greater volatility. Finally, we compare some regional integration agreements and find that the EC emerges as the most integrated block. The analytical framework used is that of Forni, Hallin, Lippi and Reichlin (1999). First version: November 1999/Final version accepted: November 2001 RID="*" ID="*"  Université Libre de Bruxelles, DULBEA – CP 140, 50 av. Franklin Roosevelt, 1050 Bruxelles, Belgium. We are grateful towards two anonymous referees for their really helpful remarks. We also wish to express our deepest gratitude towards Lucrezia Reichlin for her very precious advice. We also would like to thank Jorge Rodigez and Marco Lippi for providing large pieces of code and Khalid Sekkat, Christophe Croux, Frederic Pivetta, and Francois Rycx for helpful comments and discussions.     

Transition through subsystem innovation? The case of traffic management

This article analyzes traffic management as an example of infrastructure operation and assesses to what extent the transition approach as developed by Rotmans, Geels, and others is helpful in providing insight and contributes to the transition of the mobility system. Based on a conceptual framework which draws on the work of Luhmann and Critical Systems Thinking (CST), two cases of traffic management innovation in the Netherlands are analyzed. From this it becomes clear that traffic management is more than the optimization of the current mobility system. Rather than being a technical exercise, traffic management has to deal with substantial uncertainty which results from political dynamics and interactions between traffic management and other parts of the larger mobility system. The cases show that, in dealing with these uncertainties, actors may start to explore broader system definitions. Thus, a transition of the car-dependent mobility system is shown to be strongly emergent, which questions overly linear projections formulated by transition researchers as well as practitioners.     

The Economics of Ageing—What Do We Face?

We, as taxpayers, face challenging problems in assisting the well-being of old people mainly because preparing for and living through old age is a risky business. Through government, taxpayers can provide some insurance against the risks of old age, especially the risk of bad health and the risk of a long life. However, the ageing population suggests that maintaining this support will require increased taxation. This article quantifies this challenge for Australia and concludes that although increased taxation may be required it will be easily affordable from the much higher incomes generally received due to the secular increase in productivity.     

Do short-term laboratory experiments provide valid descriptions of long-term economic interactions? A study of Cournot markets

One key problem regarding the external validity of laboratory experiments is their duration: while economic interactions out in the field are often lengthy processes, typical lab experiments only last for an hour or two. To address this problem for the case of both symmetric and asymmetric Cournot duopoly, we conduct internet treatments lasting more than a month. Subjects make the same number of decisions as in the short-term counterparts, but they decide once a day. We compare these treatments to corresponding standard laboratory treatments and also to short-term internet treatments lasting one hour. We do not observe differences in behavior between the short- and long-term in the symmetric treatments, and only a small difference in the asymmetric treatments. We overall conclude that behavior is not considerably different between the short- and long-term.     

Are there free rides out of a recession? The case of Switzerland

During the 2008/2009 recession, most countries resorted to discretionary fiscal policy measures. In this paper, we run two simulations with the KOF Swiss Economic Institute’s macroeconomic model to assess how both the Swiss stimulus measures, and the measures taken by Switzerland’s major trading partners, have affected the Swiss economy. The KOF baseline estimate incorporates fiscal stimulus packages in Switzerland and abroad. We re-run the model, modifying the exogenous variables to represent situations in which no fiscal action was taken (a) in Switzerland and (b) elsewhere. We find that the spillover from the foreign efforts to curb the recession dwarfs the effect of the domestic stimulus packages. In addition to making its own (rather limited) efforts to fight the recession, Switzerland also took a long free-ride that far exceeded the short one it paid for.     

Is consumption too smooth? The case of the United Kingdom

This study consider whether, for the UK, the restrictions of the rational expectations permanent income (REPI) model of consumption are consistent with the data and whether consumption is too smooth given innovations in labour income. Some of the findings confirm those for the USA: the REPI restrictions are rejected. However, in marked contrast to the result of Campbell and Deaton (1989), little is found to support the view that consumption is too smooth; indeed there is some support for the view that consumption is too volatile. Some insight is given as to how such results can arise.     

Does competition cause government decentralization? The case of state-owned enterprises

This paper examines the causal effects of competition on governments’ incentives in decentralizing state-owned enterprises (SOEs). By using the shocks to product market competition caused by China's trade liberalization, we find that competition substantially improves SOEs’ decentralization. Furthermore, we also provide evidence of the incentive to exploit local information and roll out an alternative interpretation that government divests itself of SOEs because they become burdensome. Finally, we find that the effect of competition on decentralization is augmented when governments are geographically distant from their SOEs or when SOEs are located in regions characterized by low social trust, high dialect diversity, or heavy pressure for economic growth.     

Do minimum quality standards bite in polluting industries?

We investigate the introduction of a minimum quality standard in a vertically differentiated duopoly where production is polluting. We examine the alternative frameworks with quality-dependent fixed or variable costs, under both price and quantity competition. Under Bertrand behaviour, the introduction of a binding MQS regulation reduces product differentiation, which causes an increase in the output and pollution. Hence its adoption must rely on the increase in consumer surplus generated by the increase in output and average quality. Conversely, in the Cournot setting, a binding MQS decreases output and pollution, and its adoption is driven by the fact that the balance between these effects and the associated increase in average quality yields a welfare improvement.     

Does deflation affect household spending? The case of the Netherlands

This article investigates the impact of deflation on real private consumption and residential investment by Dutch households during the 1980–2013 period. We estimate theoretically founded consumption and investment equations and show that a fall in the general price level significantly negatively affects both growth in real consumption and residential investment. The impact on residential investment is more delayed, but stronger.     

Immigration and economic freedom of the US states: Does the institutional quality of immigrants' origin countries matter?

When people immigrate to the United States from countries with less economic freedom, they do not dampen economic freedom in their destination states. We use the Economic Freedom of North America report to rate the economic freedom of US states, and we group immigrants by how far below the United States their origin countries score in the Economic Freedom of the World report. Our major findings hold true even when states receive immigrants from countries with far less economic freedom. Most relationships between immigration and the US states' economic freedom scores are neither statistically nor economically significant.     

Can distortions in agriculture support structural transformation? The case of Uzbekistan

The agricultural sector plays a strategic role in the development process of a country. However, the tools used to trigger economic development are objects of controversy in theory and practice. While neoclassical theory contends that state interventions and protectionism create inefficiencies and sub-optimal allocation of resources, heterodox authors argue that those measures can be instrumental in fostering growth. Uzbekistan has applied heterodox distortive measures in agriculture. This paper investigates the implications of those distortions for the Uzbek economy. I argue that state interventions in agriculture, through surplus extraction and economies of scale, have facilitated investments in added-value industries, driving national structural transformation.     

Correction to: What can deregulators deregulate? The case of electricity

Journal of Regulatory Economics - The published version of this article contained a mistake. The name of the second author was printed incorrectly. The correct name is Kwok Ping Tsang.