DOES INPUT QUALITY DRIVE MEASURED DIFFERENCES IN FIRM PRODUCTIVITY?*

One explanation for productivity dispersion is that the quality of inputs differs across firms. We add labor market history variables such as experience and firm and industry tenure, as well as general human capital measures such as schooling and sex. Adding these variables decreases the ratio of the 90th to 10th productivity quantiles from 3.27 to 2.68 across eight Danish manufacturing and service industries. We also use the wage bill and worker fixed effects. We find that the wage bill explains as much dispersion as human capital measures.     

PEER TRANSPARENCY IN TEAMS: DOES IT HELP OR HINDER INCENTIVES?*

In a joint project involving two players of a two‐round effort investment game with complementary efforts, transparency, by allowing players to observe each other’s efforts, achieves at least as much, and sometimes more, collective and individual efforts relative to a nontransparent environment. Without transparency multiple equilibria can arise, and transparency eliminates the inferior equilibria. When full cooperation arises only under transparency, it occurs gradually: No worker sinks in the maximum amount of effort in the first round, preferring instead to smooth out contributions over time. If the players’ efforts are substitutes, transparency makes no difference to equilibrium efforts.     

DOES BIG GOVERNMENT HURT GROWTH LESS IN HIGH‐TRUST COUNTRIES?

Social trust is linked to both public sector size and to economic growth, thereby helping to explain how some countries combine high taxes with high levels of economic growth. This paper examines if social trust insulates countries against the negative effects of public sector size on growth, documented in several studies. We note that the effect is theoretically ambiguous. In panel data from 66 countries across 40 years, we find no robust evidence of insulation effects: when excluding countries with uncertain trust scores, our results suggest that big government hurts growth also in high‐trust countries, and that the mechanism is by lowering private investments. (JEL H10, O11, P16, Z10)     

FARMERS’ WILLINGNESS TO COOPERATE IN ECOSYSTEM SERVICE PROVISION: DOES TRUST MATTER?

Ecosystem service provision in agriculture may require cooperation between farmers. Trust fosters cooperation in many economic and social interactions and is important to the success of traditional agricultural cooperatives. Little is known about how trust affects farmers’ willingness to cooperate to provide an ecosystem service, what types of trust are most important, and under what conditions trust may matter. In this study, we present results of a survey of Missouri crop farmers exploring the role trust plays in farmers’ stated willingness to cooperate to control pests. We find that most farmers say they are willing to cooperate, and most farmers are willing to trust others. However, we find little evidence that trust positively influences farmers’ willingness to cooperate to control pests. Instead, we find that trust may only matter under certain conditions, such as when participants’ farms are dissimilar, and that other determinants, such as the perceived benefit of cooperation and environmental concern, are more important than trust to farmers who are contemplating cooperation to control pests.     

WHEN DOES IT PAY TO GET INFORMED?*

A repeated principal–agent problem where both sides start out symmetrically uninformed about a productivity‐related parameter and where the principal has the option to costlessly learn this parameter is analyzed. Typically, the principal delays the acquisition of information to avoid costly signaling. If the learning decision of the principal is observable by the agent, the expected delay is longer than if it is unobservable. The discrepancy is due to the ability of the principal to avoid costly signaling when he is known to be uninformed.     

FIRST IN VILLAGE OR SECOND IN ROME?*

Though individuals prefer high‐quality peers, there are advantages to being high up in the pecking order within a group. In this environment, sorting of agents yields an overlapping interval structure in the type space. Segregation and mixing coexist in a stable equilibrium. With transfers, this equilibrium corresponds to a competitive equilibrium where agents bid for relative positions and entails less segregation than the efficient allocation. More egalitarianism within organizations induces greater segregation across organizations, but can improve the allocation efficiency. Since competition is most intense for intermediate talent, effective personnel policies differ systematically between high‐quality and low‐quality organizations.     

HAVE VEHICLE REGISTRATION RESTRICTIONS IMPROVED URBAN AIR QUALITY IN JAPAN?

About 2.6 million noncompliant vehicles were removed from designated metropolitan areas in Japan after the introduction of vehicle registration restrictions under the 1992 Automobile NOx Control Law. Based on a difference‐in‐differences framework and using a monitor‐level panel dataset for the period January 1981–December 2015, we find that the intervention led to a 3%–6% reduction in the monthly mean ambient concentration of nitrogen dioxide (NO₂) in the treated areas. Back‐of‐the‐envelope calculations identify benefits equal to about US$104 million as a result of reduced mortality from asthma. (JEL Q53, Q58)     

WHITHER GERMANY AND THE EMU IN A CHALLENGING ENVIRONMENT?*

While the German economy may currently be a bright spot in Europe, it has faced substantial challenges in recent years. Moreover, tensions are rising regarding Germany's responsibilities and opportunities as a member of the European Monetary Union. Other studies have documented the difficulties that Germany has encountered as a result of the unification and further integration of Europe. This paper adds to that literature by using an aggregate translog cost function approach to examine the relationships among inputs of domestic capital and labour and imports. Our findings indicate that the input pairs of capital‐labour and labour‐imports are substitutes. The substitutes relationship between labour and imports, which has become stronger over time, suggests that increasing globalisation will add to Germany's unemployment woes. Capital and imports appear to be weak complements, but that relationship is not statistically significant. The results also suggest that imports are playing an increasingly important role in Germany's aggregate production, accentuating the role of the international environment.     

POLLUTION PERMIT SYSTEMS AND FIRM DYNAMICS: HOW DOES THE ALLOCATION SCHEME MATTER?*

I use a firm dynamics model to compare two permit allocation schemes commonly used in pollution permit systems. In the first, closing plants keep their permits, and new entrants do not get them, whereas in the second, closing plants lose their permits, and new entrants get free allowances. Calibrating the model with data from power plants participating in the U.S. program, I find that, compared to the first scheme, in the second arrangement, (i) plants stay, on average, 3.6 years longer and (ii) although the aggregate emission rate is lower, the plant distribution displays more dirty and low‐productivity plants.     

SOCIAL COMPARISON AND SUBJECTIVE WELL‐BEING: DOES THE HEALTH OF OTHERS MATTER?

The importance of social comparison in shaping individual utility has been widely documented by subjective well‐being literature. So far, income and unemployment have been the main dimensions considered in social comparison. This paper aims to investigate whether subjective well‐being is influenced by inter‐personal comparison with respect to health. Thus, we study the effects of the health of others and relative health hypotheses on two measures of subjective well‐being: happiness and subjective health. Using data from the Italian Health Conditions survey, we show that a high incidence of chronic conditions and disability among reference groups negatively affects both happiness and subjective health. Such effects are stronger among people in the same condition. These results, robust to different econometric specifications and estimation techniques, suggest the presence of some sympathy in individual preferences with respect to health and reveal that other people's health status serves as a benchmark to assess one's own health condition.     

IS MINIMUM WAGE AN EFFECTIVE ANTI‐POVERTY POLICY IN JAPAN?

This paper considers whether the minimum wage is a well‐targeted antipoverty policy by examining the backgrounds of minimum‐wage workers. Whether raising the minimum wage reduces employment for unskilled workers is also investigated. An examination of micro data from a large‐scale government household survey, the Employment Structure Survey (Shugyo Kozo Kihon Chosa), reveals that approximately half of minimum‐wage workers belong to households with annual incomes of more than 5 million yen as a non‐head of household. A regression analysis indicates that an increase in the minimum wage moderately reduces the employment of male teenagers and middle‐aged married women, while it encourages the employment of high‐school age youth.     

DOES SIZE MATTER? THE IMPACT OF CHANGES IN HOUSEHOLD STRUCTURE ON INCOME DISTRIBUTION IN GERMANY

Income inequality in Germany has been continually increasing during the past 20 years. One cause of this development, among others, could be structural shifts in household formation due to long‐term societal trends. These affect per capita incomes, which has repercussions for the income distribution even if wages remain constant. The aim of this paper is to quantify the proportion of changing household structures in the increase in inequality. We find that the growth of the income gap in Germany (for both East and West from 1991 to 2007) is indeed strongly related to changes in household structure and employment behavior, and a large part of this increase is compensated by the welfare state.     

SOCIAL INVESTMENT IN SPAIN: HOW DO SOLIDARITY MUTUAL FUNDS DECIDE THE ALLOCATION OF SOLIDARITY FUNDING BETWEEN SOCIAL ECONOMY ORGANIZATIONS?

Solidarity mutual funds (SMFs) are a financial product oriented toward funding social economy organizations (SEOs). The main characteristic of these mutual funds, known in other countries as social investment, is that part of their management fees is allocated to support SEOs. In Spain, the criteria used in the allocation process of these funds have not been studied. The aim of this paper is to analyze the decision model of SMFs. To this end, we developed a logit regression model. The obtained results show that the decision model of SMFs promotes the development of commercial activity and favors a specific ideology and values and an exclusive relationship with the main funders.     

CAN FINANCING CONSTRAINTS EXPLAIN THE ASSET PRICING PUZZLES IN PRODUCTION ECONOMIES?*

General Equilibrium asset pricing models have a difficult time simultaneously delivering a sizable equity premium, a low and counter cyclical real risk free rate, and cyclical variation in return volatility. To explain these stylized facts, this article introduces occasionally binding financing constraints that impede producers’ ability to invest. The financial frictions drive a wedge between the marginal rate of substitution and firms’ internal stochastic discount factors so that the shadow value of capital is not tied to the average price of capital. The model delivers higher and more volatile asset returns during recessions as well as a counter cyclical equity premium.     

BAILOUTS IN FEDERATIONS: IS A HARD BUDGET CONSTRAINT ALWAYS BEST?*

This article analyses hard and soft budget constraints in a federation, where there is a moral hazard problem between the central and the regional governments. Regional governments can avoid a bailout from the center by exerting costly effort. In this setting, a hard budget constraint is not always optimal because it can provide excessive incentives for high effort, and thus discourage investment that is socially efficient. Thus, a hard budget constraint can imply the opposite kind of inefficiency that emerges under a soft budget constraint, where the common pool problem can give rise to inefficiently low effort and overinvestment.     

DOES CONTRACEPTION BENEFIT WOMEN? STRUCTURE,AGENCY, AND WELL-BEING IN RURAL MEXICO

The authors of this paper examine Amartya Sen's contributions to the concept of human well-being from a gender perspective and argue that this concept is particularly useful for explaining women's decisions on contraceptive use. The study draws on data collected in six rural communities of Chiapas, Mexico. It emphasizes the ways in which public discourse articulates the apparent benefits of having small families; the context of the household and community in which rural women make reproductive decisions; and the impact of family planning programs on women's sense of subjective well-being. In particular, it questions the assumption that reduced fertility through contraception necessarily enhances women's well-being and points to the importance that women attach to being a party to reproductive decisions. The authors also explore the links between women's assessment of these decisions and of paid work, and their actual education levels and real possibilities of employment.     

DOES MONOPOLISTIC COMPETITION EXIST IN THE MENA REGION? EVIDENCE FROM THE BANKING SECTOR

The goal of this paper is to empirically assess the level of banking competition in selected Middle East and Northern African (MENA) countries. The analysis employs the estimation of a non‐structural indicator (H‐statistic) introduced by Panzar and Rosse and draws upon a panel dataset of eight MENA countries (Algeria, Egypt, Israel, Jordan, Morocco, Oman, Saudi Arabia, and United Arab Emirates) over the period 1997–2012. The empirical findings are robust towards three different panel data econometric techniques (Ordinary Least Squares, Pooled Generalized Least Squares with Fixed Effects, and Generalized Method of Moments) and consistent with other similar studies, providing sufficient evidence in favour of a banking monopolistic competition regime. Furthermore, the estimation of three other alternative measures of competition (Lerner index, adjusted Lerner index, and conduct parameter) provides similar results, revealing that the banking sector in the MENA region is characterized by a low level of Significant Market Power (SMP). Overall, the analysis shows that, despite similarities in the process of financial regulatory reforms undertaken in the eight MENA countries, the observed competition levels of banks vary substantially, with Algeria and Morocco consistently outperforming the rest of the region.