Consumers’ preferences for a local food product: a real choice experiment

This paper analyses consumers’ preferences for a local food in Spain and assesses their willingness to pay (WTP) using a real choice experiment to mitigate possible hypothetical bias. In particular, preferences for fresh lamb meat were investigated and two attributes evaluated, “locally grown” and the type of lamb meat. Data came from an experiment conducted in Spain during 2009. An error component random Parameter model with correlated errors was used to estimate the effect of the attributes on consumers’ utility and derive their WTP. Results suggest that consumers positively value both attributes and are willing to pay a premium of 9 % price increase for the “locally grown” lamb meat (“Ojinegra from Teruel”) and 13 % price increase for the “Ternasco” lamb meat. If we assume a market where only “Ternasco” lamb meat without indication of the local origin is sold, and then a new “Ternasco” lamb is introduced in the market with the “Ojinegra from Teruel” label, this new local lamb meat would capture 18 % of the market if the package is assumed to be sold at 3.5 \(\hbox {C}\!\!\!\!\!=\) and a 10 % market share if the package is assumed to be sold at 4 \(\hbox {C}\!\!\!\!\!=\) .     

Flip a coin or vote? An experiment on the implementation and efficiency of social choice mechanisms

Experimental Economics - Corporate boards, experts panels, parliaments, cabinets, and even nations all take important decisions as a group. Selecting an efficient decision rule to aggregate...     

Tax cuts and enterprises’ R&D intensity: Evidence from a natural experiment in China

This paper studies the impact of tax cuts on enterprises’ R&D intensity. We use a natural experiment involving China’s business tax changing to value-added tax (“BT to VAT”) to identify any causality. The results reveal that this tax reform has prompted enterprises to increase their research and development (R&D) investment. Specifically, a stronger ability to transfer tax, results in this change having a more significant promotional effect on enterprises’ R&D intensity. Further analysis demonstrates that firms with different ownership types and in different industries respond differently to the “BT to VAT” policy. Our findings are only significant for non-state-owned and other modern service enterprises. This paper provides a theoretical and empirical basis for detailed analyses of the effects of “BT to VAT” policy, particularly the government’s subsequent improvement to the tax reform policy, to further stimulate enterprise investments in R&D as well as industrial upgrading.     

Θ The cultural transmission of trust norms: Evidence from a lab in the field on a natural experiment

We conduct trust games in three villages in a northeastern Romanian commune. From 1775–1919, these villages were arbitrarily assigned to opposite sides of the Austrian and Ottoman/Russian border despite being located seven kilometers apart. This plausibly exogenous border assignment affected local institutions and late-18th century migration in a manner that likely also affected trust. Conditional on trust norms being affected by these centuries-old historical circumstances, our experimental design tests the degree to which such norms are transmitted intergenerationally. Consistent with theoretical predictions, we find that participants on the Austrian side that also have family roots in the village are indeed more likely to trust outsiders.     

Peer heterogeneity,school tracking and students’ performances: evidence from PISA 2006

This paper analyses the interaction between school-tracking policies and peer effects in OECD countries. Using the Programme for International Student Assessment (PISA) 2006 data set, we show that linear peer effects are slightly concave-shaped in both early-tracking and comprehensive educational systems, but generally stronger in the early-tracking one. Second, and more interestingly, the effect of peer heterogeneity goes in opposite directions in the two systems. In both student- and school-level estimates, peer heterogeneity reduces students’ achievements in the comprehensive system while it has a positive impact in the early-tracking one. This reversal effect is robust to different definitions of early-tracking system, to the inclusion of pseudo-school fixed effects and to the exclusion of outlier countries. Finally, peer effects are stronger for low-ability students in both groups of countries.     

Monopoly power and the firm’s valuation: a dynamic analysis of short versus long-term policies

Summary. Recent anti-trust cases exacerbated the concerns of investors regarding the effects of a firms monopoly power on its production choice, shareholder value, and the overall economy. We address this issue within a dynamic equilibrium model featuring a large monopolistic firm whose actions not only affect the price of its output, but also effectively influence the valuation of its stock. The latter renders time-inconsistency to the firms dynamic production choice. When the firm is required to pre-commit to its strategy, the ensuing equilibrium is largely in line with the predictions of the textbook monopoly model. When the firm behaves in a time-consistent manner, however, the predictions are strikingly at odds. The trade-off between current profits and the valuation of future profits induces the firm to increase production beyond the competitive benchmark and cut prices. This policy may result in destroying shareholder value, and does indeed fully wipe out the firms profit in the limit of the decision-making interval shrinking to zero, in line with the Coase conjecture.Received: 23 December 2003, Revised: 1 March 2004, JEL Classification Numbers: D42, D51, D92, E20, G12.Correspondence to: Anna PavlovaWe thank Steve Spear and the anonymous referees for helpful suggestions. We are also grateful to Franklin Allen, Dave Cass, Peter DeMarzo, Bernard Dumas, Ron Giammarino, Rich Kihlstrom, Leonid Kogan, Branko Urosevic, Dimitri Vayanos, seminar participants at Boston University, University of Colorado at Boulder, Columbia University, MIT, University of Pennsylvania, Princeton University, American Finance Association Meetings, and European Finance Association Meetings for valuable comments. All errors are solely our responsibility.     

Stabilizing consumer choice: the role of ‘true dynamic stability’ and related concepts in the history of consumer choice theory

Abstract

It is often argued that the inability of Arrow–Debreu general equilibrium theory to produce an adequate proof of the stability of the Walrasian price adjustment mechanism was one of the program's most significant failures. This paper will not question this standard interpretation of the history of general equilibrium theory, but makes the case that characterizing the ‘stability’ question in terms of market stability– in particular the stability of the equilibrium price vector in the Walrasian general equilibrium model – actually helped to stabilize the standard model of consumer choice in general equilibrium theory and elsewhere within microeconomics. The problem of the stability of ‘consumer's equilibrium’ was much discussed early in the twentieth century, and it has recently re-emerged in a different guise as the ‘endowment effects’ and ‘reference dependencies’ of contemporary behavioral economics, and yet it disappeared from mainstream discussion during the period 1950 to 1980. This paper argues that shifting the discussion from the intra-agent stability of the individual consumer to the inter-agent stability of the competitive market contributed – despite its ultimately negative impact on general equilibrium theory – to the long period of stable normal science consumer choice theory enjoyed during the middle of the twentieth century.     

Banking sector depth and economic growth nexus: a comparative study between the natural resource-based and the rest of the world’s economies

This paper investigates the relationship between banking sector depth and long-term economic growth in the natural resource-based economies vis-à-vis economies that are not dependent on natural resources. For the empirical investigation, a Generalised Method of Moments estimator for dynamic panel data models is adopted for 194 countries spanning the period 1964–2013. Using different measures of banking sector depth and economic growth, the investigation yields three key findings. First, the banking–growth relationship is non-linear and positive within certain levels of banking sector depth in both country groups. Second, the time lag between the change in the level of banking sector depth and the effect on economic growth is shorter in the natural resource-based countries than in the other countries. Finally, the total effect of banking sector deepening on long-term economic growth is weaker in economies with abundant natural resources than in the rest of the world.     

Do protest responses to a contingent valuation question and a choice experiment differ?

It is suggested that the number of protest responses in stated preference surveys depends, inter alia, on the valuation method used. Choice Experiments (CE) are said to generate a lower number of protest responses than Contingent Valuation (CV). However, no comparison of both methods with respect to protest responses has been conducted to date. We used both CE and CV in a survey on forest biodiversity in two German regions. Protest beliefs were measured for all respondents irrespective of whether they were willing to pay or not. The results show no clear pattern of differences between CE and CV regarding protest beliefs and protest responses. Using an attitude scale based on respondents’ protest beliefs, we see a significant negative effect of this attitude on willingness to pay in both methods. However, in one of the two study regions, the effect is weaker in CE than in CV.      

The effect of parental background along the sons’ earnings distribution: does one pattern fit for all?

This article sheds light on the differences in the mechanisms generating intergenerational inequality in the four largest Euro Area economies (Spain, Italy, Germany and France) looking at the association between parental background and sons’ earnings along the sons’ distribution. We find that in all countries returns to parental background increase along the sons’ earnings distribution and the probability of ending up in high deciles is significantly correlated with parental background. However, although these findings lend support to the existence of a common mechanism, substantial differences in returns’ steepness question the one-pattern-fits-all story.     

Subject pool effects in a corruption experiment: A comparison of Indonesian public servants and Indonesian students

We report results from a corruption experiment with Indonesian public servants and Indonesian students. Our results suggest that the Indonesian public servant subjects have a significantly lower tolerance of corruption than the Indonesian students. We find no evidence that this is due to a selection effect. The reasons given by the subjects for their behaviour suggest that the differences in behavior across the subject pools are driven by their different real life experiences. For example, when abstaining from corruption, public servants more often cite the need to reduce the social costs of corruption as a reason for their actions, and when engaging in corruption, they cite low government salaries or a belief that corruption is a necessary evil in the current environment. In contrast, students give more simplistic moral reasons. We conclude by emphasizing that results obtained from different subject pools can complement each other in illuminating different aspects of the same problem. We would like to thank Charles Noussair and the participants of the Experimental Economics Workshop (2006) at the University of Melbourne for their comments. Daniel Piccinin and Revy Sjahrial have provided excellent research assistance. We are grateful to the Australian Research Council and the World Bank for their financial assistance.     

What is the right profile for getting a job? A stated choice experiment of the recruitment process

We study the recruitment behaviour of Swedish employers using data from a stated choice experiment. In the experiment, the employers are first asked to describe an employee who recently and voluntarily left the firm and then to choose between two hypothetical applicants to invite to a job interview or to hire as a replacement for their previous employee. The two applicants differ with respect to characteristics such as gender, age, education, work experience, ethnicity, religious beliefs, family situation, weight, and health, but otherwise have similar characteristics as the previous employee. Our results show that employers prefer not to recruit applicants who are old, non-European, Muslim, Jewish, obese, have several children, or have a history of sickness absence. We also calculate the reduction in wage costs needed to make employers indifferent between applicants with and without these characteristics, and find that wage costs would have to be reduced by up to 50 % for applicants with some characteristics.     

Profit-sharing versus interest-taking in the Kaldor–Pasinetti theory of income and profit distribution

Abstract

This paper reformulates the Kaldor–Pasinetti model of income and profit distribution by introducing the interest rate from the very outset of the model but maintaining other Kaldor–Pasinetti assumptions intact. It is shown that the profit rate and the share of profits in national income are not independent from either the capitalists' or workers' propensity to save. Many contributors to the theory of income and profit distribution have erred in attributing a potentially positive impact of the interest rate upon profits. The interest rate is always and everywhere a tax on functional and personal incomes together. This result explains Schumpeter's observation that ‘Interest acts as a tax upon profit.’ In an alternative model, workers receive a share of profits instead of fixed contractual interest. It is shown that the profit rate and share are not independent from either propensity to save. Furthermore, the workers' share of profits has a positive impact on the rate and share of profits. This implies that a profit sharing regime could be more conducive to capital accumulation and job creation. It is found that Pasinetti's Cambridge Equation is more akin to a profit sharing regime.     

Sustainable exploitation of a natural resource: a satisfying use of Chichilnisky’s criterion

Chichilnisky’s criterion for sustainability has the merit to be, so far, the unique explicit, complete and continuous social welfare criterion that combines successfully the requirement of efficiency with an instrumental notion of intergenerational equity (no dictatorship of the present and no dictatorship of the future). But it has one drawback: when applied in the context of renewable resources, and with a constant discount factor, there exists no exploitation path that maximizes this criterion. The present article suggests a way to cope with this problem. The idea is to restrict attention to the set of convex combinations between the optimal discounted utilitarian program and the stationary program leading to the green golden rule. It is shown that an optimal path in this set exists under rather weak sufficient conditions on the fundamentals of the problem. Some ethical properties of this approach are also discussed. In some cases, it turns out that the restricted solution implies no loss of efficiency and benefits intermediate and infinitely distant generations.     

Balancing the risk of ‘Lazearian’ interrupters and the benefits of educational and social peers: tracing parental preferences for class-size reduction

Using Danish survey data from a choice experiment, parental preferences for class-size reduction are estimated. While parents with children in large classes are willing to pay for class-size reduction, parents with children in small classes are reluctant and even express negative utility for further class-size reduction. We interpret this as parents balancing the risk of ‘Lazearian’ interrupters and the benefits of educational and social peers when forming their preferences for class size.     

Economic class and the distribution of income: a time-series analysis of the UK economy, 1955–2010

This paper contributes to our understanding of the determinants and dynamics of surplus-value using quarterly UK data, 1955–2010, and the Johansen (1988 Johansen, S. 1988. Statistical analysis of cointegrated vectors. Journal of Economic Dynamic and Control, 12: 231–54. [Crossref], [Web of Science ®] , [Google Scholar], 1991 Johansen, S. 1991. Estimation and hypothesis of cointegration vectors in Gaussian vector autoregressive models. Econometrica, 59: 1551–80. [Crossref], [Web of Science ®] , [Google Scholar]) cointegration and vector error correction model (VECM). A model is introduced to define this Marxian concept, before we explain distribution, paying attention to three forces that are traditionally seen as drivers of power in this struggle: (i) working class militancy; (ii) the size of the ‘reserve army’ of the unemployed; and (iii) political party. Our results demonstrate the ongoing relevance of Marxian economics in providing an alternative, robust and significant explanation of distribution in the post-war UK economy.     

Assessing students’ equality of opportunity in OECD countries: the role of national- and school-level policies

This article analyses the relationship between equality of opportunity and the characteristics of the educational system, jointly considering country- and school-level policies. Because school social environment represents a fundamental channel in shaping educational opportunities, we consider all policies, recorded in PISA 2012 dataset, that affect the sorting of students to schools. We show that including sorting policies enriches the explanation of the socio-economic gradient, that is, the association between students’ performances and parental background, with respect to previous studies including only country-level features. The negative impact of early tracking on equality of opportunity is overvalued without including other sorting policies, while grouping students’ within-school by ability increases the socio-economic gradient and a greater students’ heterogeneity in the school reduces the gradient.