Competitive screening and information transmission

We consider a model in which schools and colleges compete for high-ability students, which are independently identified through a costly screening procedure. This independence creates a channel through which students' preferences affect the strategic interaction between schools: students with competing offers accept the most-preferred one, increasing the screening costs of unpopular schools. When preferences between schools are more heterogeneous, schools screen more, increasing the proportion of students with multiple offers, but paradoxically reducing the extent to which their preferences determine their outcomes. By observing the students' schools of origin, colleges can free-ride of the fierce competition that occurs during screening.     

Multi-dimensional skills,specialization, and oligopolistic competition in higher education

This paper develops a differentiated products model of school competition that distinguishes among different dimensions that matter in the skill acquisition process. The model predicts that when identical schools compete for students, specialization may arise as a competition strategy. This serves rich students' education goals well. Poorer students, however, may attend schools with specializations that do not cater to their relative strengths. By doing so, these poorer students complement the weaknesses of the richer students through peer effects and receive financial aid in return. The empirical analysis provides strong support for the model's predictions about within-school implications of specialization.     

Product market competition,incentives and fraudulent behavior

The present paper studies incentive provision in a model where a manager can affect the firm's stock price by exerting unobservable effort and through costly, deceptive signalling and investigates the role product market competition plays in shaping shareholders' trade-off between inducing effort and fraud.     

Factors influencing education achievement

This study sets out to examine the factors that influence human capital formation in predominately rural communities. The results indicated that parents’ educational attainment greatly influences the quality of education for their children. Thus, consolidating smaller poor schools in which the parents have limited education above primary and secondary schools, will not likely lead to much if any improvement in students' test scores.     

Laying the Tracks for Successful Science,Technology, Engineering and Mathematics Education: What Can We Learn from Comparisons of Immigrant–Native Achievement in the USA?

This paper examines the immigrant–native achievement gap in science, technology, engineering, and mathematics (STEM) fields in college in the USA. Using student survey data from the Beginning Postsecondary Longitudinal Studies 2004/09, I find that on average immigrant students have significantly higher rates entering and persisting in STEM fields compared to their native counterparts. There is, however, considerable variation across immigrant generations and race and ethnicity. The immigrant attainment advantage is particularly large among first‐generation Asian and white immigrant students who attended foreign K–12 schools. I explore the channels leading to the achievement gap, including socioeconomic status, individual preferences, and academic preparation in math and science. Results suggest that the immigrant STEM advantage is largely due to better academic preparation in math and science in high school. This indicates that improvements in students' college STEM attainment may depend crucially on policy efforts devoted to strengthening the quality of high school math and science education.     

Renewable resource regulation and uncertain prices: The role of financial structure and bankruptcy

We analyze the interaction between regulatory policies and the financial structure of a fishery and show that firms with debts may respond differently to regulations than firms that have not accumulated debts. There are conditions where more stringent regulation is counterproductive, providing a perverse incentive to increase harvesting effort. We show that optimal regulation depends on the sector's financial structure, and demonstrate that there are cases when intervention is counterproductive, or too costly to implement. There are also cases where successful regulatory intervention can only be implemented when accompanied by a sufficiently large subsidy.     

On the Relationship Between Innovation and Product Market Competition

This paper considers a theoretical model where firms reduce their initial unit costs by spending on R&D activities in a collusive market and where firms are able to coordinate on distinct output levels other than that of the unrestricted joint profit maximization outcome. We show that, in our model, the degree of collusion (captured by the discount factor) reduces the incentive to innovate when innovation is made non‐cooperatively. The reason is that non‐cooperative R&D introduces a negative externality where firms overinvest beyond the effort required to minimize the cost in order to extract profits from the rival firm, and a reduction in product competition helps internalize the externality. In a research joint venture the absence of R&D rivalry leads to contrary results. The main implication is that the validity of the Schumpeterian hypotheses depends on the extent of cooperation at the R&D stage.     

The Fear of Exclusion: Individual Effort when Group Formation is Endogenous*

To secure their membership in a popular group, individuals may contribute more to the group's local public good than they would if group formation were exogenous. Those in the most unpopular group do not have this incentive to contribute. This may result in substantial differences in individual effort level between groups. Our model thus provides one explanation for the existence of group‐specific behavioral norms. A principal will prefer exogenous or endogenous group formation depending on whether he prefers high or low levels of the local public good. We analyze two stylized examples: social interaction in schools, and multiple‐task teamwork.     

A simple economic theory of skill accumulation and schooling decisions

We propose a model of schooling that can account for the observed heterogeneity in workers' productivity and educational attainment. Identical unskilled agents can get a degree at a cost, but becoming skilled entails an additional unobservable effort cost. Individual labor can then be used as an input in pairwise production matches. Two factors affect students' desire to build human capital: degrees imperfectly signal productivity, and contract imperfections generate holdup problems. Multiple stationary equilibria exist, some of which are market failures characterized by a largely educated workforce of low average skill. Policy implications are explored.     

Performance Pay and Adverse Selection*

It is well known in personnel economics that firms may improve the quality of their workforce by offering performance pay. We analyze an equilibrium model where worker productivity is private information and show that the firms’ gain from worker self‐selection may not be matched by a corresponding social gain. In particular, the equilibrium incentive contracts are excessively high‐powered, thereby inducing the more productive workers to exert too much effort and increasing agency costs stemming from the misallocation of effort.     

ON PREJUDICE

This paper examines how prejudice biases an evaluation outcome. We also show that referring to past data, which leads to prejudice, can provide a better estimator for the quality of the object under evaluation, even if biased, in the sense that it reduces the mean squared error. However, in cases in which the quality of the evaluation depends on the referee's effort, as well as on his ability, prejudice aggravates the evaluation outcome by dampening his refereeing efforts, thus possibly yielding a worse estimator than no prejudice even in terms of the mean squared error. If evaluators possess prejudice, an individual's performance in the earlier stage of his career becomes more important, at least in the short run, thus creating an incentive to work harder in the earlier stage than in the later stage. This may provide an alternative explanation for cut‐throat competition in the earlier stage to the traditional signaling argument.     

GRANTING AN EXIT OPTION TO CONDUCT AN AUDIT

We study a principal–agent relationship with auditing in which information from an audit is ‘soft’– by conducting an audit, the principal observes the agent's private information, but cannot obtain verifiable evidence on the information. Moreover, the principal's auditing effort is unverifiable in our model. Therefore, besides the agent's misreporting incentive, there is the principal's incentive to accuse the truthful agent even without auditing. If the principal's auditing effort is verifiable, granting no exit option to the agent is optimal although the principal can still accuse a truthful agent after the audit. We show that when the principal's auditing effort is unverifiable, granting an exit option to the agent and auditing are complementary. Without granting an exit option to the agent, no auditing is optimal, and the principal grants an exit option to conduct a sincere audit, which in turn mitigates the agent's misreporting incentive. Our analysis also reveals that, when the cost of auditing is sufficiently large, the principal conducts more sincere audits with a smaller amount of penalty.     

The effects of vertical and horizontal incentives on local tax efforts: evidence from China

Tax effort is a measure of a government’s effort to collect taxes. This study explores what impacts both vertical and horizontal incentives have on local governments’ tax efforts in China. For consistency with the literature, we first include typical economic and institutional factors in our analysis. We find that the effects of economic factors on local tax efforts are significant, but the effects of institutional factors tend to be weak. Fiscal decentralization, as a vertical incentive, has a significantly positive effect on tax efforts at the provincial level. Meanwhile, fiscal interaction, as a horizontal incentive, is also taken into account in a spatial specification to explain tax competition among local governments. The results show that local tax effort in China also depends on the horizontal incentive. Hence, to improve local tax effort, the central government should let the locals have more autonomy in collecting taxes and evaluate local tax effort by referring to tax collection in adjacent provinces simultaneously.     

Grain inflation: Identifying agent discretion in response to a conditional school nutrition program

Many incentive programs rely on local agents with significant discretion to allocate benefits. We estimate the degree of discretion exercised by teachers within a conditional transfer program designed to improve nutrition and encourage student attendance in Mumbai, India. The program allocates grain to students every month their attendance exceeds 80% , creating an incentive for teachers to inflate attendance to benefit certain students. We find that teachers manipulate students' records, altering the incentives to attend school. The teachers' response also varies across students. Teachers inflate more for girls, better students, and students from lower castes, but less for Muslim students.     

TECHNOLOGY TRANSFERS FOR CLIMATE CHANGE

This article considers the transfer of cost‐reducing technology in the context of contributions to climate protection. We analyze a two‐period public goods model where later contributions can be based on better information, but delaying the mitigation effort is costly because of irreversible damages. Investments in technology affect the countries' timing of contributing. We show that countries have an incentive to provide cost‐reducing technology as this can lead to an earlier contribution of other countries and can therefore reduce a country's burden of contributing to the public good. Our results provide a rationale for the support of technology sharing initiatives.     

Entrepreneurial innovations,competition and competition policy

We construct a model where an entrepreneur can innovate for entry or for sale. It is shown that increased product market competition tends to increase the relative profitability of innovation for sale. Increased competition not only reduces the profits of entrants and the acquirer of the inventions in a similar fashion, but also reduces the profit of non-acquirers. Therefore, incumbents' valuations of innovations are less negatively affected by increased competition, and the incentive for innovation for sale can increase with increased competition. Moreover, a stricter, but not too strict, merger policy is shown to increase the incentive for innovations for sale by ensuring the bidding competition for the innovation.     

School entry age and educational attainment in developing countries: Evidence from China's compulsory education law

We investigate the causal impact of age of enrolment on educational attainment in a developing country setting. Using China's 1986 Compulsory Education Law, which established a new nationally uniform age threshold for primary school enrolment as a natural experiment, we find that the probability of attending high school falls by 3.6 percentage points when school enrolment is postponed by one year. We provide suggestive evidence that those who start school later are not better learners, and that older students' higher labor opportunity cost plays an important role in explaining the negative impact of school entry age on educational attainment.     

Vertical product differentiation and two-sided markets

We model platform competition in a market where products are characterized by cross network externalities. Consumers differ in their valuation of these externalities. Although the exogenous set-up is entirely symmetric, we show that platform competition induces a vertical differentiation structure that allows for the co-existence of asymmetric platforms in equilibrium. We establish this result in two set-ups: in the first one platforms commit to prices, in the second one they commit to network sizes.     

EXCESSIVE COMPETITION ON HEADLINE PRICES

In a variety of purchasing situations, consumers may focus primarily on headline prices, disregarding the full costs associated with acquiring and maintaining a product or service contract. Even when this is the case, the literature has delineated various circumstances where intense competition can protect consumers through the so-called “waterbed effect.” In this article, we however show that when consumers have context-dependent preferences, competition may rather exacerbate their and society's harm by distorting product choice and provision. Then, consumer protection policy must sufficiently constrain hidden fees so that competition, along with high-quality firms' incentives to educate consumers, can restore efficiency.