Adolescents’ (un)happiness in transition

In this paper, we analyse the life satisfaction of adolescents in transition countries, comparing their life satisfaction with that of their peers in non-transition countries. We find that, at the start of transition, ceteris paribus, the life satisfaction of the adolescents in our sample of transition countries is somewhat smaller, but not significantly so, than the life satisfaction of the adolescents in our sample of non-transition countries. With the economic crisis of the early 1990s, however, the difference increased dramatically, but, by the beginning of the 2000s, this gap had again become fairly limited. From that point, respondents’ health situation, their material wealth and their school experience mattered much more than whether they lived in a transition country or not. Unlike the literature on adults, we do not find that after controlling for individual level variables, macro variables play an important role in adolescent happiness.     

Formal institutions and subjective well-being: Revisiting the cross-country evidence

A long tradition in economics explores the association between the quality of formal institutions and economic performance. The literature on the relationship between such institutions and happiness is, however, rather limited, and inconclusive. In this paper, we revisit the findings from recent cross-country studies on the institution–happiness association. Our findings suggest that their conclusions are qualitatively rather insensitive to the specific measure of ‘happiness’ used, while the associations between formal institutions and subjective well-being differ among poor and rich countries. Separating different types of institutional quality, we find that in low-income countries the effects of economic–judicial institutions on happiness dominate those of political institutions, while analyses restricted to middle- and high-income countries show strong support for an additional beneficial effect of political institutions. Our results bear important implications that we discuss in the concluding section of the paper.     

Empirical linkages between good governance and national well-being

This paper brings together the largest available sets of national-level data, covering 157 countries over the years 2005–2012, to assess the extent to which governance quality contributes to life evaluations. Our most significant new finding is that changes in governance quality within a policy-relevant time horizon can lead to significant changes in the quality of life. For example, the ten most-improved countries, in terms of changes in government service delivery quality between 2005 and 2012, when compared to the ten most-worsened countries, are estimated to have average life evaluations higher by 0.4 points on a 0 to 10 scale. The results also confirm earlier findings that service delivery quality generally dominates democratic quality in supporting better lives until delivery quality has reached sufficient levels. The situation changes as development proceeds, with democratic quality showing a positive influence among countries that have already achieved higher quality of service delivery.     

Ethnicity and the distribution of welfare: Evidence from southern Kyrgyzstan

Economic disparity between ethnic groups is sometimes supposed to be the main driver of ethnic conflict. Understanding the extent and the sources of such disparity is then important to help formulate policies that aim at avoiding further conflict. This paper analyzes economic disparity between Kyrgyz and Uzbeks in southern Kyrgyzstan. These groups were involved in violent clashes in the recent past. Using household survey data from 2005, we show that, in contrast to the public perception, Kyrgyz households have slightly higher expenditure than Uzbek households in urban areas and about the same level in rural areas. The gap in urban areas is mostly due to smaller households and higher education among the Kyrgyz. We also find that Uzbek households are better off than Kyrgyz households in terms of the value of housing property. We argue that the house value gap can be explained by the Uzbeks having larger houses, which are home to larger families and serve as a basis for running small businesses.     

Lost in transition: Life satisfaction on the road to capitalism

In the 1990s transition from socialism to capitalism in Eastern Europe life satisfaction followed the collapse and recovery of GDP, but failed to recover commensurately. By 2005, with GDP averaging about 25 per cent above its early 1990s level, life satisfaction was typically back to its earlier level, but was arguably still below pre-transition values. Increased satisfaction with material living levels occurred at the expense of decreased satisfaction with work, health, and family life. In the decade of the 1990s, disparities in life satisfaction increased with those hardest hit being the less educated and persons over age 30; women and men suffered about equally.     

Democracy and prosperity in two decades of transition1

This article revisits the relationship between democracy, liberalization and prosperity in transition countries, using a panel of 25 countries over 20 years. Earlier investigations found political and economic liberalization to be positively correlated although the relationship between political liberalization and prosperity remained unclear. In this article, the results are ambiguous regarding the relationship between democracy indicators by Freedom House and the Polity Project on one hand and growth on the other. This contribution therefore investigates the component variables of these indicators to determine their degree of influence. The findings suggest that basic constitutional rights and constraints on the government rather than political competition as such may be conducive to both economic liberalization and prosperity in the transition countries.     

Fairness and inequality tolerance: Evidence from the Life in Transition Survey

This paper examines the link between inequality and individual well-being using household survey data from 27 transition economies, where income inequality increased considerably since 1989. A test of inequality aversion in individual preferences that draws on the Fehr and Schmidt (1999) specification of inequality aversion is proposed, and the difficulties of implementing it in a non-experimental setting are discussed. Estimates based on this model confirm aversion to inequality among individuals both in the pooled sample and separately among the EU and non-EU countries. The Gini index, on the other hand, is unable to capture this negative effect of inequality on well-being. Notably, inequality aversion is not intrinsic. Rather, it appears to be tied to a concern with the fairness of the institutions underlying the distribution of fortunes in society. The evidence is suggestive of inequality of opportunity driving attitudes toward overall inequality.     

AIDS mortality and its effect on the labor market: Evidence from South Africa

This paper investigates how HIV/AIDS has impacted the labor market in South Africa, focusing on its effect on wages and employment. This is done by matching individual level data with group specific cumulative AIDS mortality rates. Exploiting the panel nature of the data, I remove individuals whose productivity is most likely impacted by HIV/AIDS, and find evidence that cumulative AIDS mortality has led to reductions in wages of between 3 and 6% for the African population group (Black South Africans). Furthermore, I also find evidence that the epidemic has lowered employment in South Africa. This result is concentrated among those with the lowest levels of education and employment. Although not large in magnitude, these effects are widespread across a significant portion of the population, contributing to a substantial loss of income throughout the South African economy.     

Income comparisons and attitudes towards foreigners - Evidence from a natural experiment

We exploit a natural experiment related to the German re-unification to address whether disutility from income comparisons affects attitudes towards foreigners. Our empirical approach rests upon East German individuals with West German relatives and friends. We use the exogenous variation of wealth of West Germans shortly after the fall of the Berlin Wall as an instrument to identify the effect of disutility from income comparisons on East Germans’ attitudes. We find robust evidence that East Germans express more negative attitudes towards foreigners, particularly from low-wage countries, if they worry about their economic status compared to better-off West Germans.     

The choice of ownership structure: Evidence from Russian mass privatization

We use a large data set of Russian manufacturing firms to describe the ownership structure in the Russian industry at the end of the mass privatization program in 1994 and its subsequent evolution. The data shows a high, but gradually decreasing ownership stakes of firm insiders (managers and workers). We estimate the effect of a wide range of firm characteristics on the decision to privatize, the initial ownership structure after privatization, and on subsequent changes of ownership stakes. We test and find support for several predictions of the model by Aghion and Blanchard (1998). For example, collusion among workers makes them more reluctant to sell shares to outsiders. Firms in financial distress show a higher incidence of insiders selecting the option of privatization leading to high insider ownership. This can be explained by their desire to insure against unemployment in the case of restructuring by outsiders. No evidence is found of a sequencing in privatization according to the performance of firms before privatization. A methodological novelty of this paper is the application of a tobit model with sample selection to the choice of ownership stakes.     

Trade policy and quality leadership in transition economies

Trade policy and quality leadership in transition economies are analyzed in a duopoly model of trade and vertical product differentiation. We first show that the incidence of trade liberalization is sensitive to whether firms in transition economies are producers of low or high quality. Second, we find that neither free trade nor the absence of a domestic subsidy are optimal: Both a tariff and a subsidy increase price competition and while the former extracts foreign rents the latter results in quality upgrading. Third, there exists a rationale for a government to commit to a socially optimal policy to induce quality leadership by the domestic firm when cost asymmetries are low. Finally, we establish an equivalence result between the effects of long-run exchange rate changes and those of trade policy on price competition (but not on social welfare).     

Globalization’s winners and losers—Evidence from life satisfaction data, 1975-2001

Using data for the EU-15 countries from 1975 to 2001, we find that globalization has especially increased the subjective well-being of high-skilled workers, right-wing voters, high-income earners, and of respondents that trust the WTO, the World Bank, and the IMF.     

Poverty projection using a small area estimation method: Evidence from Vietnam

For poverty monitoring and evaluation, one needs poverty estimates at the different disaggregation levels. The prediction of poverty trend is also of interest for policy makers as well as researchers. This paper presents a method – that is based on a small area estimation method of Elbers et al. (2003) – to project a map of disaggregated poverty measures in the future. This method is applied to project a poverty map in rural Vietnam for the year 2008 using the 2006 Rural, Agricultural and Fishery Census and the 2004 and 2006 Vietnam Household Living Standard Surveys.     

Bidding behavior in competing auctions: Evidence from eBay

Much of the existing auction literature treats auctions as running independently of one another, with each bidder choosing to participate in only one auction. However, in many online auctions, a number of substitutable goods are auctioned concurrently and bidders can bid on several auctions at the same time. Recent theoretical research shows how bidders can gain from the existence of competing auctions, the current paper providing the first empirical evidence in support of competing auctions theory using online auctions data from eBay. Our results indicate that a significant proportion of bidders do bid across competing auctions and that bidders tend to submit bids on auctions with the lowest standing bid, as the theory predicts. The paper also shows that winning bidders who cross-bid pay lower prices on average than winning bidders who do not.     

Income taxes and entrepreneurial choice: empirical evidence from two German natural experiments

Does tax policy affect entrepreneurial choice? We use two tax reforms in Germany as “natural experiments”. These reforms reduced the marginal income tax rate for entrepreneurs with income above a certain threshold, with the exception of freelance professionals. The two conditions for belonging to the treatment group allow us to apply a “difference-in-difference-in-difference” identification strategy to estimate the effects of the tax rate reductions. We base our analysis on the microcensus, the official representative continuous household survey in Germany. The results indicate that the tax rate reductions increased the probability of choosing self-employment.     

Gender,productive ability and the perceived returns to education: Evidence from rural India

Recent research has established the importance of perceived (as opposed to actual) returns as a determinant of educational investments. We analyze data from India to highlight gender disparities in the perceived returns to education and the salience of productive characteristics.     

Lab and framed lab versus natural experiments: Evidence from a risky choice experiment

Some recent papers have studied data from TV game shows to examine the behaviour of individuals towards risk. It is generally agreed that data from these shows are useful in detecting individual risk aversion in the field, with both “real life” subjects and incentives. Field experiments also include some interesting reality features that could affect individuals’ behaviour and possibly lead to different findings. This paper aims at investigating lab versus field evidence in risk taking attitudes, especially controlling for framing effects. To assess whether the behaviour of subjects in the field is consistent with that of experimental subjects, we designed an experiment to mimic (with experimental rewards and subjects) the rules of a well-known Italian TV game show, Affari Tuoi, in two different settings: a traditional lab setting, where the game was played individually (109 subjects) (Treatment 1); and a framed lab, in which the experiment was replicated in the Italian public television (RAI) studio where the show was actually recorded, with a smaller sample of undergraduate students (33) and in the presence of an audience (Treatment 2). Our comparison between the two different settings aims at establishing whether the presence of an audience, or of a situation that reproduces the stress that contestants must experience in the TV studio, can affect experimental subjects’ choices. We did not find any significant evidence of framing effects: students behave in a similar way in the two lab settings, responding essentially to incentives. Comparing the risk attitudes shown by experimental subjects in the two lab treatments with those exhibited by the contestants in the field, we found that contestants in the TV show are generally more risk averse than students in the lab.     

Is the state-led industrial restructuring effective in transition China? Evidence from the steel sector

During the reform era, the Chinese government has been carryingout strategic industrial policies modelled on those in post-warJapan and South Korea, in the hope of transforming its highlyfragmented manufacturing sector into one that comprises a smallnumber of internationally competitive big businesses. Usingthe evolution of the Chinese steel industry structure from thelate 1980s to the early 2000s as a case in point, this paperfinds that the Chinese government's consolidation attempts have,by and large, not been very successful. The disappointing policyoutcome is interpreted by a detailed examination of the industrypolicy mechanism in China. It is concluded that the institutionalframework of the Chinese state differs from its counterpartsin Korea and Japan in some fundamental aspects. Among these,the fragmented and uncoordinated Chinese bureaucracy contributessignificantly to the inefficacy of policy implementation.     

Economic transition and gender differentials in wages and productivity: Evidence from Chinese manufacturing enterprises

We use firm-level data to analyze male–female wage differences in Chinese industry in the late 1990s. Our estimates indicate that employers' discrimination against women was not a significant source of the gender wage gap in Chinese state-owned enterprises. Instead, we find that the relative wage of unskilled female to male workers was higher than their relative productivity. This result indicates that unskilled female workers in the state sector had historically received wage premiums and consequently accounted for a disproportionate share of the sector's labor surplus.