Do Spillovers Stimulate Incremental or Drastic Product Innovations? Evidence from German Establishment Data*

Despite the generally recognized importance of knowledge spillovers, the empirical literature is essentially silent on the type of innovation stimulated by spillovers. We estimate the determinants of product innovations differing in their degree of newness to the adopting firm. Knowledge spillovers from rivals have a positive impact on incremental innovations. This impact is largely independent of participation in R&D cooperation. Spillovers exert no such independent influence on drastic innovation activities. The results support the hypothesis that establishments face difficulties in using knowledge that comes from areas they are not familiar with. Establishments exploit spillovers for incremental innovations rather than for drastic innovations. To some degree R&D cooperation can help to overcome the difficulties in using spillovers for drastic innovations. Furthermore, our estimates provide evidence that the firm's own R&D effort and the use of outside information are substitutes.     

Crowding Out Informal Care? Evidence from a Field Experiment in Germany*

This article evaluates the effects of a consumer‐directed home care programme (Personal Budgets) compared with the standard home care programmes of the German long‐term care insurance (LTCI). The evaluation makes use of a random assignment into a treatment group receiving personal budgets and a control group receiving either in‐kind benefits (agency care) or cash payments. Compared with agency care, personal budgets extend the support by independent providers, but leave health outcomes unchanged. Compared with cash payments, personal budgets tend to improve health outcomes, but double LTCI spending due to a strong crowding out of informal care by formal care.     

Does Ethnic Discrimination Vary Across Minority Groups? Evidence from a Field Experiment*

We conduct a large‐scale field experiment to measure labour market discrimination in Australia, one quarter of whose population was born overseas. To denote ethnicity, we use distinctively Anglo‐Saxon, Indigenous, Italian, Chinese and Middle Eastern names. We compare multiple ethnic groups, rather than a single minority as in most other studies. In all cases we applied for entry‐level jobs and submitted a CV indicating that the candidate attended high school in Australia. We find significant differences in callback rates: ethnic minority candidates would need to apply for more jobs in order to receive the same number of interviews. These differences vary systematically across ethnic groups.     

Do bailouts buy votes? Evidence from a panel of Hessian municipalities

I study whether bailouts of local governments carry electoral benefits for state governments with a dataset covering 421 municipalities in the German state of Hesse over the period 1999–2011. I find that past bailouts have no economically significant effect on the municipality-level vote share of the parties that formed the state government in subsequent state elections. On the other hand, bailouts lead to vote increases for the ruling parties in subsequent local elections. On balance, these results suggest that electoral concerns are not the reason why central governments find it difficult to commit to a no-bailout policy.     

Does Managerial Ability Really Drive Cost Efficiency? Evidence from Broiler Businesses

This paper ascertains whether managerial ability really drives cost efficiency of broiler businesses. Data was collected from 354 broiler businesses in Ghana and analysed using a modified stochastic Cobb–Douglas cost frontier and inefficiency effect models in a single‐stage maximum likelihood estimation procedure. Results indicate that managerial abilities such as technical advice, age and experience acquired through full‐time farming and increased batches significantly drive cost efficiency. This highlights the need to provide more technical advice and implement periodic capacity building programmes to develop the managerial ability and competences of broiler producers. The youth should also be encouraged and supported through skills development fund to go into full‐time broiler business to produce more batches. Copyright © 2016 John Wiley & Sons, Ltd.     

Does the Gender Preference for Competition Affect Job Performance? Evidence from a Real Effort Experiment

Experimental evidence has documented that competition may enhance the performance of male subjects in some tasks when competition is imposed exogenously by the experimenter. This note describes data for a task where a simple agency relationship is established in the laboratory between two groups of agents, managers, and workers. The manager chooses from either the piece rate or tournament payment scheme for the worker. The results show that male performance decreases when the tournament is chosen for them by the manager and also suggests that the gender of the manager may be an important facet of the agency relationship. Copyright © 2012 John Wiley & Sons, Ltd.     

Do macroeconomic and financial governance matter? Evidence from Germany, 1950–2019

This study hypothesises that economic governance matters for economic performance; neglecting its role in creating positive synergies between macro- and microeconomic institutions has underlain significant coordination failures and costs. This study examines economic governance in the context of mutual feedback between macro-financial governance (FGV), macro-non-financial governance (NFGV), and micro-financial development (FND) in Germany in the period 1950–2019. The study uses an institutionalist approach, introducing two modes of economic governance based on institutional complementarities and tests its hypotheses using both an exhaustive structuralist analysis and a time-series quantitative technique based on the Autoregressive Distributed Lag cointegration model and the Vector Error Correction Mechanism. The study concludes that (i) the German model of economic governance based on the positive complementarities between FGV, NFGV and FND in the period 1950–1982 significantly enhanced real economic performance, that (ii) the fragmentation of the model became a key determinant of the country’s weak economic performance in the periods 1983–2019 and 1990–2019, and that (iii) the path-dependence of coordinational mechanisms and underlying institutional dynamics, though fragmented, prevented the genesis and embedding of an irrational exuberance in the country.

     

Do retail mergers affect competition? Evidence from grocery retailing

This study estimates the price effects of horizontal mergers in the U.S. grocery retailing industry. We examine fourteen regions affected by mergers, including mergers in highly concentrated and relatively unconcentrated markets. We identify price effects by comparing markets affected by mergers to unaffected markets using difference‐in‐difference estimation with three different comparison groups, propensity score weights, and by using the synthetic control method. Our results are robust to the choice of control group and estimation technique. We find that mergers in highly concentrated markets are most frequently associated with price increases, and mergers in less concentrated markets are most often associated with price decreases.     

Do house price developments spillover across euro area countries? Evidence from a global VAR

This paper empirically assesses the prospects for house price spillovers in the euro area, where co-movement in house prices across countries may be particularly relevant given a general trend with monetary union toward increasing linkages in trade, financial markets, and general economic conditions. A global VAR is estimated for three housing demand variables (real house prices, real per capita income, and the cost of borrowing, captured by a real long-term interest rate) on the basis of quarterly data for 7 euro area countries (Belgium, Germany, Ireland, Spain, France, Italy and the Netherlands), which together comprise nearly 90% of euro area GDP, over the period 1971–2009. The results suggest limited house price spillovers in the euro area, albeit with evidence of some overshooting in the first year after the shock, followed by a long run aggregate euro area impact of country-specific changes in real house prices related in part to the country’s economic weight. This contrasts with the impacts of a shock to domestic long-term interest rates, causing a permanent shift in house prices after 2–3 years. Underlying this aggregate development are rather heterogeneous house price spillovers at the country level, with a strong importance for weights – either economic or geographic – in governing their general magnitude. More generally, the impact of financing costs on house prices appears to have grown though time.     

Do option-like incentives induce overvaluation? Evidence from experimental asset markets

One potential reason for bubbles evolving prior to the financial crisis was excessive risk taking stemming from option-like incentive schemes in financial institutions. By running laboratory asset markets, we investigate the impact of option-like incentives on price formation and trading behavior. The main results are that (i) we observe significantly higher market prices with option-like incentives than linear incentives. (ii) We further find that option-like incentives provoke subjects to behave differently and to take more risk than subjects with linear incentives. (iii) We finally show that trading at inflated prices is rational for subjects with option-like incentives since it increases their expected payout.     

Do liberal cities limit new housing development? Evidence from California

Traditional explanations for why some communities block new housing construction focus on incumbent home owner incentives to block entry. Local resident political ideology may also influence community permitting decisions. This paper uses city level panel data across California metropolitan areas from 2000 to 2008 to document that liberal cities grant fewer new housing permits than observationally similar cities located within the same metropolitan area. Cities experiencing a growth in their liberal voter share have a lower new housing permit growth rate.     

Do Business Executives Give More to Their Alma Mater? Longitudinal Evidence from a Large University

The novel contribution of this research is the examination of the gift‐giving patterns of alumni business executives of a large urban public university. Our results reinforce the earlier findings that male alumni in Greek social organizations gave more to their alma mater. New insights unique to this study are that alumni with the higher‐order executive job titles are more charitable. Further, the number of known other gift‐giving alumni and friends seems to positively impact giving. The national athletic championship wins are also significant positive drivers of alumni giving in the championship year, as well as in the succeeding nonchampionship year.     

Does the Capitalization of Development Costs Improve Analyst Forecast Accuracy? Evidence from the UK

It has been documented that investments in Research and Development (R&D) are associated with increased errors and inaccuracy in earnings forecasts made by financial analysts. These deficiencies have been generally attributed to information complexity and the uncertainty of the future benefits of R&D. This paper examines whether the capitalization of development costs can reduce analyst uncertainty about the future economic outcome of R&D investments, provide outsiders with a better matching of future R&D‐related revenues and costs, and therefore promote accuracy in analyst forecasts. UK data is used, because accounting rules in the United Kingdom permitted firms to conditionally capitalize development costs even before the introduction of the International Financial Reporting Standards. The choice to expense R&D rather than conditionally capitalize development costs is found to relate positively to signed analyst forecast errors. This finding is robust to controlling for the influence of other factors that may affect errors, as well as for the influence of R&D investments on forecast errors. The decision to capitalize versus expense is not observed to have a significant influence on analyst forecast revisions. The findings are interpreted as evidence that the choice to capitalize as opposed to expense may help to reduce deficiencies in analyst forecasts; hence, is informative for users of financial statements. Increased informativeness is expected to have repercussions for the effectiveness with which analysts produce earnings forecasts, and, as a result, market efficiency.     

Do institutional investors monitor management? Evidence from the relationship between institutional ownership and capital structure

We examine the dynamic relations between institutional ownership and a firm's capital structure. We find that a firm's leverage decreases when institutional ownership increases. This result implies that a firm reduces its debt level as institutional investors substitute for the monitoring role of debt. More importantly, we find that a firm's suboptimal leverage decreases when the institutional ownership increases, and institutional ownership decreases when a firm's suboptimal leverage increases. This finding shows that institutions not only effectively monitor a firm's capital structure but they also passively sell their shares when dissatisfied with it. In addition, we find that the monitoring evidence on a firm's leverage and suboptimal leverage are more pronounced when the institutional investors are less likely to have business relationships with a firm or the information asymmetry is high in the market.     

Does federal financial aid affect college enrollment? Evidence from drug offenders and the Higher Education Act of 1998

In 2001, amendments to the Higher Education Act made people convicted of drug offenses ineligible for federal financial aid for up to two years after their conviction. Using rich data on educational outcomes and drug charges in the NLSY 1997, we show that this law change had a large negative impact on the college attendance of students with drug convictions. On average, the temporary ban on federal financial aid increased the amount of time between high school graduation and college enrollment by about two years, and we also present suggestive evidence that affected students were less likely to ever enroll in college. Students living in urban areas are the most affected by these amendments. Importantly, we do not find that the law deterred young people from committing drug felonies nor did it substantively change the probability that high school students with drug convictions graduated from high school. We find no evidence of a change in college enrollment of students convicted of non-drug crimes, or of those charged by not convicted of drug offenses. In contrast to much of the existing research, we conclude that, for this high-risk group of students, eligibility for federal financial aid strongly impacts college investment decisions.     

Do charter schools crowd out private school enrollment? Evidence from Michigan

Charter schools have been one of the most important dimensions of recent school reform measures in the United States. Though there have been numerous studies on the effects of charter schools, these have mostly been confined to analyzing their effects on student achievement, student demographic composition, parental satisfaction, and the competitive effects on traditional public schools. This study departs from the existing literature by investigating the effect of charter schools on enrollment in private schools. To investigate this issue empirically, we focus on the state of Michigan where there was a significant spread of charter schools in the nineties. Using data on private school enrollment from biennial NCES private school surveys, and using a fixed effects as well as an instrumental variables strategy that exploits exogenous variation from Michigan charter law, we investigate the effect of charter school penetration on private school enrollment. We do not find any causal evidence that charter schools led to a decline in enrollment in the private schools. Further, we do not find evidence that enrollments in Catholic or other religious schools were affected differently from those in non-religious private schools. Our results are robust to a variety of sensitivity checks.     

Do employment subsidies work? Evidence from regionally targeted subsidies in Turkey

This paper studies the effects on registered employment and number of registered establishments of two employment subsidy schemes in Turkey. We implement a difference-in-differences methodology to construct appropriate counterfactuals for the covered provinces. Our findings suggest that both subsidy programs did lead to significant net increases in registered jobs in eligible provinces (5%–13% for the first program and 11%–15% for the second). However, the cost of the actual job creation was high because of substantial deadweight losses, particularly for the first program (47% and 78%). Because of better design features, the second subsidy program had lower, though still significant, deadweight losses (27%–46%). Although constrained by data availability, the evidence suggests that the dominant effect of subsidies was to increase social security registration of firms and workers rather than boosting total employment and economic activity. This supports the theory that in countries with weak enforcement institutions, high labor taxes on low-wage workers may lead to substantial incentives for firms and workers to operate informally.     

Do environmental regulations hamper small enterprises' market entry? Evidence from China

Due to the serious increase of environmental pollution in China, environmental regulations have become significantly stringent. Such regulations are playing an increasingly important role in the development of small enterprises (SEs) in China, especially in SEs' market entry. However, existing studies pay little attention to this issue. This paper investigates for the first time the effect of environmental regulations on SEs' market entry and the mechanism of environmental regulation effects in China. We consider two sets of panel data for the periods 2003–2010 and 2012–2015 in China. We also use the fixed effect model and the instrumental variable method to explore the role of environmental regulations in SEs' market entry. The results show that, overall, environmental regulations play a significantly positive and robust role in SEs' market entry. However, the mechanisms associated with the effect of environmental regulations on different innovative types of SEs differ. Environmental regulations promote the market entry of SEs with product innovation, but this impact is not significant for SEs with research and development (R&D) activities and R&D institutions. Our findings indicate that China's SEs prefer product innovation, which is a lower level innovative type, over R&D innovation, as a means to avoid the negative impact of stringent environmental regulations.     

Correction to: Do macroeconomic and financial governance matter? Evidence from Germany, 1950–2019

Journal of Economic Interaction and Coordination - A Correction to this paper has been published: 10.1007/s11403-022-00356-7