How does the ordering of questions affect elicited time preferences?

Since time preferences constitute a concept fundamental to economics, many economists have attempted to elicit time preferences by using multiple price lists. In such endeavours, however, little attention has been paid to the effect of the ordering of questions on elicited time preferences although the ordering effect is well known. We analysed a representative sample of the Indonesian population (13,870 men and 15,858 women) by applying censored maximum likelihood regressions. We exploited the randomized ordering of two series of delay questions (1- and 5-year delays) and estimated the causal effect of the ordering on elicited time preferences. Respondents who considered the longer-delay questions exhibited more patience, and the effects were larger for women. Economists need to take into account the ordering effect as they design experiments by which to elicit time and other preferences.     

How does petty corruption affect tax morale in Sub-Saharan Africa?

Revenues from taxation gain in importance to finance economic development in Sub-Saharan Africa. One obstacle to enhancing the willingness to remit taxes can be the extortion of bribes by public officials. Using micro-level data from the Afrobarometer, we show that petty corruption erodes tax morale. The effect on tax morale is more severe in countries and regions where fewer people are affected by petty corruption and becomes insignificant if extortion of bribes is particularly prevalent. Differing levels of civic participation and potential access to tax funded services are also found to induce heterogeneous reactions to corruption experience. Applying a mediation analysis, we demonstrate that petty corruption not only has a direct effect on tax morale but also diminishes confidence in tax authorities and therefore affects tax morale indirectly. The harmful effects of corruption experience, however, operate mainly through a generally lowered inclination to uphold high levels of tax morale.     

How does governance affect tax avoidance? Evidence from shareholder proposals

I examine the effect of corporate governance on tax avoidance. Specifically, I use a regression discontinuity design to analyse the effect of governance-related shareholder proposals that pass or fail by a small percentage of votes. The passage of such proposals around the 50% threshold can be viewed as random assignment of improved governance and thus cleanly identifies a causal estimate. I find that the adoption of governance proposals decreases cash effective tax rates (ETR), which suggests that improved governance increases tax avoidance. The result contributes to our understanding of the determinants of firms’ ETR.     

How does cooperative innovation affect innovation performance? Evidence from Chinese firms

This paper explores the impact of different cooperation networks upon their cooperative innovation effect (CIE) and innovation performance, and examined the relationship between the CIE and the innovation performance of firms. Some interesting findings appear. First, the findings indicate that there are significant and positive relationships between the seven cooperation networks and the CIE of firms, of which the internal cooperation network has the most significant and positive impact on their CIE. Second, the findings also reveal that there are significant and positive relationships between the six cooperation networks, except firm–government cooperation (FGC) and the innovation performance of firms. Third, contrary to some studies from developed countries, the results reveal that FGC does not demonstrate any significant impact on the innovation performance of firms. These results enrich and supplement the current understanding of the relationships between cooperation networks and innovation performance.     

How does violence affect exporters? Evidence from political strikes in Bangladesh

Using novel daily data, we examine the impact of political violence on firm‐level export activity. Our data cover the universe of political strikes and export transactions in Bangladesh during 2010–2013 and allow us to examine the effects of these strikes at a highly granular level. We first show that multiday political strikes lower the likelihood that a firm will export by 6.30 percentage points. We then examine whether these disruptions result in adverse effects on export prices. Given that this violence creates greater risk of missed shipments, importers may respond by demanding lower prices as compensation. We provide the first evidence of such adverse price effects of political violence. Our results suggest that during July to December, 2013, when there was a multiday political strike every 5 days, the prices of time‐sensitive Bangladeshi products declined by 1.59%.     

How does anti-corruption campaign affect the labour income share in China?

Based on the difference-in-difference (DID) methodology, this paper empirically investigates the impact of the current anti-corruption campaign on the share of labour income in China. Using a firm-level data on Chinese corporations listed on Shanghai and Shenzhen Stock Exchanges from 2009 to 2015, we find that the campaign contributes to the rise in the labour income share, while there is considerable heterogeneity. The magnitude of the effect depends on firm’s ownership and market power. This paper advances the existing studies examining the nexus between corruption and income distribution from a novel perspective.     

How does wealth distribution affect firm's incentive to innovate better quality goods?

The paper contributes to the literature relating to inequality and economic growth, in particular, we investigate the effects of wealth distribution on the kind of growth driven by innovation, i.e. Schumpeterian growth. Since two types of individuals are assumed, the poor and the rich, Gini-coefficient is treated in two variables, namely the relative wealth of the poor and the population share of the poor, each having a different effect on economic performance. Particularly in the separating equilibrium, an improvement in the relative wealth of the poor impedes economic growth, but a decline in the population share of the poor enhances economic growth. Furthermore, the current paper combines the Schumpeterian quality improvement model and the neoclassic production function. Thus, the impact of wealth inequality on economic growth is through the supply of human capital as well as the demand for better quality goods. Our results suggest that empirical research on the base of Gini-coefficient cannot generate a general relationship between wealth inequality and economic growth.     

How does stock liquidity affect corporate tax noncompliance? Evidence from China✰

Using an exogenous shock that drastically increased the liquidity of stocks listed in China, we find robust evidence that higher liquidity significantly increases the overall level of tax noncompliance. The increase is more substantial when controlling shareholders own more shares, and diversion for private benefits is less complementary to tax noncompliance. Liquidity has no significant impact on tax evasion—the most aggressive and risky tax noncompliance—and at the higher ends of the tax noncompliance distribution. The positive and significant effects are observed only at lower levels of tax noncompliance. We attribute the weaker impact of liquidity on aggressive tax noncompliance to diversion being more complementary to higher-risk tax noncompliance.     

How does your kindergarten classroom affect your earnings? Evidence from Project Star

In Project STAR, 11,571 students in Tennessee and their teachers were randomly assigned to classrooms within their schools from kindergarten to third grade. This article evaluates the long-term impacts of STAR by linking the experimental data to administrative records. We first demonstrate that kindergarten test scores are highly correlated with outcomes such as earnings at age 27, college attendance, home ownership, and retirement savings. We then document four sets of experimental impacts. First, students in small classes are significantly more likely to attend college and exhibit improvements on other outcomes. Class size does not have a significant effect on earnings at age 27, but this effect is imprecisely estimated. Second, students who had a more experienced teacher in kindergarten have higher earnings. Third, an analysis of variance reveals significant classroom effects on earnings. Students who were randomly assigned to higher quality classrooms in grades K–3—as measured by classmates' end-of-class test scores—have higher earnings, college attendance rates, and other outcomes. Finally, the effects of class quality fade out on test scores in later grades, but gains in noncognitive measures persist.     

How does environmental performance affect financial performance? Evidence from Japanese manufacturing firms

This paper examines the effects of environmental performance on financial performance using the data of Japanese manufacturing firms from 2004 to 2008. As the environmental performance, our study considers the two different environmental issues of waste and greenhouse gas emissions in capturing the effects of corporate environmental management on financial performance. In addition, to clarify how each financial performance responds to a firm's effort in dealing with different environmental issues, we utilize many financial performance indices reflecting various market evaluations. Our estimation results show the different effects of each environmental performance on financial performance. Waste emissions do not generally have significant effects on financial performance. On the other hand, greenhouse gas reduction leads to an increase in financial performance in the whole sample and clean industries, although it does not have significant effects on financial performance in dirty industries. Furthermore, as the firm growth rate increases, the partial effects of waste emissions on financial performance decrease, whereas the partial effects of greenhouse gas emissions on financial performance increase.     

How does equity capital cost affect bank performance during a financial crisis?

This article theoretically examines how equity capital cost affects return performance and safety of a bank and how this effect varies across a financial crisis comparing to a normal time when the bank manager’s performance reveals the like of higher equity return and the dislike of higher equity risk. We derive two main results. First, an increase in the bank’s equity capital cost from an increase of the interest rate of the Federal funds results in a reduced loan risk-taking at an increased optimal bank interest margin, implying better bank performance. Second, by ignoring the dislike, we find that the better performance is reinforced during a financial crisis but is reduced during a normal time. Financial crises and the dislike preference as such contribute a relatively low return and the stability of banking activities.     

How does immigration affect modes of foreign market access: trade and FDI?

This article presents a study of the effects of immigration on trade and FDI. Our analysis is distinct from previous work because it systematically examines the interactions between immigration, trade and FDI. Previous studies treated FDI–immigration relationships as being independent of the modes of foreign market access. Using bilateral data of Japan and 28 other economies for the period 1996–2011, our analysis shows that FDI inflows become more dominant compared to imports when skilled immigration flows increase and less dominant when unskilled immigration flows increase. The results suggest that the relevant policy instruments as regards the promotion of trade, FDI and immigration should vary depending on economic goals, such as current account balances and labour shortages.     

How does public spending affect technical efficiency? Some evidence from 15 European countries

The relationship between government size and economic growth has been widely debated. Revisiting the subject from a distinct angle with respect to the mainstream approach, we provide an empirical analysis of the impact of government size on technical efficiency. The aim of this paper is to estimate the impact of public sector's size and of public expenditure components on 15 European countries’ technical efficiency from 1996 to 2014 by using a True Random Effect model. Using the total public expenditure as a proxy for the government size we estimate simultaneously national optimal production function and technical efficiency by controlling for income distribution and institutional quality. Our main findings show that the effect of public sector's size on efficiency is positive while the type of public expenditures may have both positive and negative impact. In more details, results suggest that education and health expenditures have a positive effect on technical efficiency, while others have a negative impact.     

Do credit unions have distinct objectives? Evidence from executive compensation structures

Credit unions compete directly with commercial banks in markets for consumer financial services yet receive an exemption from federal corporate income tax. Commercial banks claim that credit unions are no different than banks and that the credit union tax exemption represents an unfair competitive advantage. Credit unions counter that while they offer similar products and services, they differ from commercial banks in terms of structure and mission, given their not-for-profit, cooperative status. In this paper, we test for substantive differences in the objective functions of commercial banks and nonprofit credit unions by comparing CEO compensation structures. Drawing on the relevant principal–agent literature, we provide several arguments to support the hypotheses that credit union boards of directors establish lower-powered incentive contracts with their CEOs relative to similarly sized commercial banks, and offer lower total compensation. We find that credit union CEOs receive approximately 250% less performance-based compensation relative to CEOs of similarly sized community banks. Bank CEOs also earn approximately 15% to 20% more total compensation on average. The results are generally robust to controlling for CEO- and board-level characteristics, local economic conditions, and institution-level indicators of size, growth, complexity, liquidity and risk. The findings suggest important differences in incentive structures and objectives between banks and credit unions.     

How does the design of international environmental agreements affect investment in environmentally-friendly technology?

In this paper, we investigate how the design of international environmental agreements (IEAs) affects the incentives for the private sector to invest in environmentally-friendly technology. The givens are a transboundary pollution problem involving two asymmetric countries in terms of benefits arising from global abatement. There is a single polluting firm in each country. We account for two types of IEAs: an agreement based on a uniform standard with transfers and an agreement based on differentiated standards without transfers. To carry out this study, we use a two-stage game where the private sector anticipates its irreversible investment given the expected level of abatement standards resulting from future negotiations. Our findings indicate that the implementation of the agreement based on a uniform standard with transfers may be preferable for the two countries, as it creates greater incentives for firms to invest in costly abatement technology. This result arises when this technology’s level of the sunk cost of investment is low. If this level is sufficiently high, the implementation of the same agreement is not beneficial to countries, because it takes away the incentive of each firm to invest in new abatement technology. Moreover, this agreement is not able to generate any positive gains for either country through cooperation, thus no country is motivated to cooperate.     

How does FDI affect domestic firms’ wages? theory and evidence from Vietnam

This paper explores the role of inward foreign direct investment (FDI) as a determinant of domestic firms’ wages, namely wage spillovers. We first construct a theoretical model to demonstrate that the presence of FDI firms affects domestic firms’ expected average wages via productivity spillovers and a cut-off capability. We then estimate FDI-induced wage spillovers by employing IV-GMM estimator with a five-year panel dataset of a growing service industry in Vietnam. Despite FDI firms on average pay 2.25 times that of domestic firms, they put a downward pressure on domestic firms’ wages. A one percent increase in FDI presence causes domestic firms to cut average wages by 2.03 percent. The estimations also find that firm-specific features are attributable to significant differences in their wages as well as FDI-linked wage spillovers.     

How can robots affect wage inequality?

We explain the simultaneous presence of i) increasing per capita output, ii) declining real wages of low-skilled workers, and iii) a rising wage premium of higher education within a model of economic growth in the age of automation. The theoretical implications are consistent with the data for the United States since the 1970s. Thus, automation contributes towards our understanding of the driving forces of rising inequality. The immediate policy conclusion is that investments in higher education can help to soften the negative effects of automation.     

How does anti-corruption affect firm labour inputs? Evidence from a quasi-natural experiment in China

This study investigates the impact of anti-corruption on firm labour inputs. Using the province-by-province rollout of the central inspection team campaign in China, we find that the labour intensity rises by 9% in the firms located in the provinces inspected by the central inspection teams. Moreover, firms with low corruption are more susceptible to the policy shock.     

How does leverage affect R&D intensity and how does R&D intensity impact on firm value in South Korea?

We examine how leverage affects corporate research and development (R&D) intensity, as well as examine the impact of R&D on firm value in South Korea, a country in which corporate-funded R&D intensity is one of the highest in the world. Among our main results, we find that growth opportunities have a positive effect on R&D intensity, while leverage has a negative effect on R&D intensity. When leverage is at an extremely high level, the relationship between growth opportunities and R&D intensity turns from positive to negative. Using instrumental variables, we find that R&D generates an increase in firm value.     

Is executive compensation a substitute governance mechanism to debt financing and leasing?

This study examines whether and how CEO equity incentives relate to financing choices (i.e., debt and leases). Using manually collected CEO compensation and lease data for a sample of large UK firms, we found evidence of a negative relationship between CEO equity incentives and firm leverage. We also found that CEO equity incentives and leases are negatively related. The results are consistent with the theory introduced in this study on the substitutability of executive compensation and firm’s debt/lease financing. Our findings represent fresh empirical evidence and renewed interpretation regarding the relationship between executive equity-based incentives and firm’s financing choices. The substitutability theory we introduced here suggests that firms with greater use of debt and/or leases will implement less equity-based compensation in mitigating the agency cost of equity.