Efficiency in Crime Prevention: A Study of Lisbon’s Police Precincts

This article analyses the technical efficiency of Lisbon’s police precincts by evaluating their relative performance. It starts from the assumption that there is time‐varying efficiency and uses a stochastic cost‐frontier model to generate efficiency scores. Indeed, this efficiency model is thoroughly investigated. However, the results are found to be at best mixed, because the model reveals low efficiency and time‐unvarying scores. To increase efficiency, this article advocates an improvement of top management procedures, based on a governance‐environment framework.     

Nonprofits and public good provision: A contest based on compromises

Two competing nonprofits with ideologically distinct missions compete for donor funding to provide an indivisible public good in a population with heterogeneous preferences. This paper examines the extent to which (average) public values are undermined and nonprofits’ ideology compromised in a contractual game in which the right to provide the public good is the outcome of competition between nonprofits. We also scrutinize the roles of (i) cooperative versus competitive contracting, (ii) multiple public goods, (iii) enforceability of actions and (iv) observability of nonprofit costs in determining the equilibrium terms of the contract. In each case, the intensity of the ideological divide between the donor and the nonprofits jointly impact the degree to which compromises are made in terms of both the public's and nonprofit's missions, and the ability on the part of the donor to reap double (cost-saving and strategic) financial gains.     

Investment behavior and the biased perception of limited loss deduction in income taxation

We use a laboratory experiment to study the extent to which investors’ choices are affected by limited loss deduction in income taxation. We first compare investment behavior in the no tax baseline to a tax control setting, in which the income from investments is taxed. We find that investors significantly reduce their risk-taking as predicted by theory. Next we compare the baseline investment choices to choices under three different types of income taxation. We observe that risk-taking is significantly increased with partial and with capped loss deduction, but is unaffected by a tax system that allows no loss deduction. Since in all these treatments the after tax outcomes of the prospects were identical, we conjecture that investors have a positively biased perception of partial and capped loss deduction that promotes their willingness to take risks.     

Location and ownership of public goods

We introduce location choice for the public good in the property rights framework. We find that it can be optimal to separate location from ownership.     

Optimal ownership of public goods reconsidered

Consider a non-governmental organization (NGO) that can invest in a public good. Should the government or the NGO own the public project? In an incomplete contracting framework with split-the-difference bargaining, Besley and Ghatak (2001) argue that the party who values the public good most should be the owner. We demonstrate the robustness of their insight when the split-the-difference rule is replaced by the deal-me-out solution. Our finding is in contrast to the private good results of Chiu (1998) and De Meza and Lockwood (1998), who show that the optimal ownership structure crucially depends on whether the split-the-difference rule or the deal-me-out solution is used.     

Non-convexities in the adjustment of different capital inputs: A firm-level investigation

Recent developments in investment research have highlighted the importance of non-convexities and irreversibilities in firms’ adjustment of quasi-fixed inputs. Aggregation across capital goods may smooth out the discontinuities associated with the adjustment of individual assets. Lack of suitable data is one of the reasons why empirical work has typically relied on the assumption of capital homogeneity. In this paper we exploit a data set of 1539 Italian firms which allows us to disaggregate capital into equipment and structures, and purchases and sales of assets. We construct measures of fundamental Q to capture investment opportunities associated with each asset. We uncover the pattern of dynamic adjustment by using non-parametric techniques to relate each individual investment to its own fundamental Q.     

COMPARATIVE ANALYSIS OF PLANT DYNAMICS BY SIZE: KOREAN MANUFACTURING

A comparative analysis on Korean manufacturing plants is performed by size of plants and sources of TFP growth are decomposed into entry, exit, and survival effects of plants, focusing on the pre- and post-crisis periods. Additional survival analyses investigate internal and external determinants of the survival of plants. The results indicate that the exit of small- and medium-sized establishments (SMEs) with higher productivity is becoming problematic in the post-crisis period. The improvements in large-scale establishments (LSEs) after the crisis appeared to occur generally in high-technology industrial sectors; SMEs in low-technology industries are suffering from a sluggish market selection process.     

Not just babble: Opening the black box of communication in a voluntary contribution experiment

We let subjects in a voluntary contribution experiment make non-binding numerical announcements about their “possible” contributions and, in some treatments, send written promises to contribute specific amounts. We find that announcements were responded to both by others’ announcements and by real play, for example announcements led to costly punishment when found to be misleading. We also find that adding pre-play announcements to treatments with punishment can increase efficiency by letting cost-free warnings substitute for costly punishment. The threat of punishing false announcements and promises helps reduce false signals, but only when promise statements can be sent is the effect sufficient for achieving greater efficiency.     

Incomes and Inequality in the Long Run: The Case of German Elderly

Abstract. We use German Sample Survey income data to examine the income distribution for elderly individuals during the period from 1978 to 2003. The elderly population, defined as people of age 55 and older, is decomposed by people resident in the Old and New Federal States. Further, we distinguish between persons receiving old‐age pensions and persons who do not. Inequality estimates are decomposed by income components, and the bootstrap method is used to test for statistical significance of results.     

The behaviour of relative prices in the European Union: A sectoral analysis

Using multivariate unit root test methods, this paper investigates the Purchasing Power Parity (PPP) hypothesis at the sectoral level across six European countries over the last 17 years. Evidence of mean reversion towards PPP is found for the relative prices of some sectors and countries. Mean reversion in relative prices is explained by cross-country and cross-sectoral characteristics such as the distance between countries, nominal exchange rate volatility, differences in GDP per capita, non-tariff barriers, research and development, advertising, industrial concentration and tradeability of the products.     

The public and private provision of pure public goods and the distortionary effects of income taxation: a political economy approach

Abstract .  A pure public good is provided by the government and the voluntary contributions of two types of households. The government finances its contribution by means of income taxation. The latter has distortionary effects. A third type of household never makes contributions. We analyse the effects of changes in the income tax rate on (a) the provision of the public good, (b) the private contributions of the households, and (c) changes in the distribution of income and welfare between contributing and non-contributing households. We derive a simple and testable condition under which the lowering of the income tax entails a Pareto improvement.     

On the endogeneity of Cournot-Nash and Stackelberg equilibria: games of accumulation

We characterize equilibria of games with two properties: (i) Agents have the opportunity to adjust their strategic variable after their initial choices and before payoffs occur; but (ii) they can only add to their initial amounts. The equilibrium set consists of just the Cournot-Nash outcome, one or both Stackelberg outcomes, or a continuum of points including the Cournot-Nash outcome and one or both Stackelberg outcomes. A simple theorem that uses agents’ standard one-period reaction functions and the one-period Cournot-Nash and Stackelberg equilibria delineates the equilibrium set. Applications include contribution, oligopoly, and rent-seeking games.     

Public goods in networks

This paper considers incentives to provide goods that are non-excludable along social or geographic links. We find, first, that networks can lead to specialization in public good provision. In every social network there is an equilibrium where some individuals contribute and others free ride. In many networks, this extreme is the only outcome. Second, specialization can benefit society as a whole. This outcome arises when contributors are linked, collectively, to many agents. Finally, a new link increases access to public goods, but reduces individual incentives to contribute. Hence, overall welfare can be higher when there are holes in a network.     

Outsourcing, productivity, and input composition at the plant level

Abstract .  We evaluate the productivity and input composition effects of outsourcing (or subcontracting) for Turkish textile and apparel manufacturing plants. We analyze differences in performance indicators for plants that subcontract inputs or outputs, and find that plants that outsource internationally perform better than those that outsource domestically. We evaluate labour productivity gaps and find that more productive plants both initiate outsourcing and subsequently increase their productivity. We then estimate a flexible production function, controlling for simultaneity and selection bias, and find that higher productivity from input subcontracting involves greater skilled labour intensity but the reverse is true for output subcontracting.     

Public procurement in times of crisis: The bundling decision reconsidered

The government wants two tasks to be performed. In each task, unobservable effort can be exerted by a wealth-constrained private contractor. If the government faces no binding budget constraints, it is optimal to bundle the tasks. The contractor in charge of both tasks then gets a bonus payment if and only if both tasks are successful. Yet, if the government has only a limited budget, it may be optimal to separate the tasks, so that there are two contractors each in charge of one task. In this case, high efforts in both tasks can be implemented with smaller bonus payments.     

A solution to the hold-up problem involving gradual investment

We consider a setting in which the buyer's ability to hold up a seller's investment is so severe that there is no investment in equilibrium of the static game typically analyzed. We show that there exists an equilibrium of a related dynamic game generating positive investment. The seller makes a sequence of gradually smaller investments, each repaid by the buyer under the threat of losing further seller investment. As modeled frictions converge to zero, the equilibrium outcome converges to the first best. We draw connections between our work and the growing literature on gradualism in public good contribution games and bargaining games.     

On the informational inefficiency of discriminatory price auctions

We analyze bidding behavior in large discriminatory-price auctions in a common value setting where the number of objects is a non-trivial proportion of the number of bidders. We show that the average price paid in the auction is biased downward from the expected value of the objects, even in the competitive limit. We show that conditional on a signal that falls below a threshold, a bidder bids no more than the expected value of an object conditional on the signal and winning; while conditional on any signal that lies above the threshold the bid is strictly lower than the expected value conditional on the signal and winning.     

Cooperators and reciprocators: A within-subject analysis of pro-social behavior

We perform a within-subject analysis of pro-social behavior in the public-good and gift-exchange game. We find that participants classified as cooperators in the public-good game tend to reciprocate higher wages in the gift-exchange game with higher levels of effort. Non-cooperators do not exhibit such tendency. Both types offer similar wages.     

Implementing the Mortensen rule in a frictional labor market

We show that, in settings where meetings can be multilateral, the allocation rule proposed by Mortensen (1982) can be relatively straightforward to implement: as a local auction conducted by sellers. The implications of using this mechanism in a simple model of the labor market are then explored. We characterize the equilibrium properties of this model, which include wage dispersion, and examine its implied Beveridge curve. A dynamic version of the model is calibrated to the US labor market, and we show that the model can account for observed vacancy rates, given parameters that are chosen to match the average wages and the natural rate of unemployment, although the implied wage dispersion is quite small. Finally, in the limit, as the time between offer rounds in the model approaches zero, the equilibrium approaches the Walrasian competitive equilibrium.     

A Dynamic Incentive‐Based Argument for Conditional Transfers*

We compare the long‐run effects of replacing unconditional transfers to the poor by transfers conditional on the education of children. Unlike Mirrlees’ income taxation model, the distribution of skill evolves endogenously. Human capital accumulation follows the Freeman–Ljungqvist–Mookherjee–Ray OLG model with missing capital markets and dynastic bequest motives. Conditional transfers (funded by taxes on earnings of the skilled) are shown to induce higher long‐run output per capita and (both utilitarian and Rawlsian) welfare, owing to their superior effect on skill accumulation incentives. The result is established both with two skill levels, and a continuum of occupations.