A Polarization Index for Overlapping Groups

The well‐known index of income bipolarization proposed by Wolfson (1994) requires two groups to be split according to the median income and, therefore, to be non‐overlapping. The aim of this paper is to propose a new polarization index in the spirit of the Wolfson index. It allows for any possible partition of the population in two or more (also overlapping) groups. The new index maintains the simplicity and immediate comprehension of the Wolfson index, though being much more flexible. An application is then provided for German and Italian income data.     

The Case of the Missing Pollution Haven Hypothesis

One particularly vexing puzzle for economists and policymakers over the past several decades concerns the empirical significance of the theoretically predicted pollution haven hypothesis. While neoclassical theory and conventional wisdom both surmise that local economies will suffer deleterious effects from stricter environmental regulations, empirical studies have largely failed to validate such claims. This study utilizes the method of matching to show that the impact of stricter regulation is heterogeneous spatially, varying systematically based on location-specific attributes. Previous studies that assume a homogenous response may therefore inadvertently mask the overall impact of more stringent regulations by pooling unaffected and affected regions.JEL Classification: Q25, Q28, H00, L51, R1The authors wish to thank to Michael Crew, Anthony Heyes, an anonymous referee, Werner Antweiler, Randy Becker, Wayne Gray, Shelby Gerking, Michael Greenstone, Vern Henderson, and Arik Levinson. Participants at various university seminars and conferences also lent useful insights to this line of research.     

The effect of pay-for-performance contracts on wages

I investigate the role played by learning and self-selection according to comparative advantage in the often reported result that piece rate workers (including commissions) earn more on average compared to other workers. With comparative advantage, the returns to skills differ across pay methods. I find that comparative advantage along with learning about worker skills seem to play a role for workers who are either at an early stage in their career or who are observed for the first time in a given job-match. For older workers, the return to skills is basically the same across pay methods.     

Short Run Constraints and the Increasing Marginal Value of Time in Recreation

Leisure activities such as local recreation trips usually take place in discrete blocks of time that are surrounded by time devoted to other commitments. It can be costly to transfer time between blocks to allow for longer outings. These observations affect the value of time within those blocks and suggest that traditional methods for valuing time using labor markets miss important considerations. This paper presents a new model for time valuation that uses non-employment time commitments to infer the shadow value of time spent in recreation. A unique survey that elicited revealed and stated preference data on household time allocation is used to implement the model. The results support the conclusion that there is an increasing marginal value of time for recreation as the trip length increases.     

Understanding perpetual R&D races

This paper presents an experimental study of dynamic indefinite horizon R&D races with uncertainty and multiple prizes. The theoretical predictions are highly sensitive: small parameter changes determine if we should expect technological competition, and if so whether it is sustained, or if the market converges into one with entrenched leadership and lower aggregate R&D. The subjects’ strategies are far less sensitive. In most of the treatments, the R&D races tend to converge to entrenched leadership. We propose and apply a quantal response extension of Markov perfection that is qualitatively and largely quantitatively consistent with the experimental observations.     

Disputed Rivers: Sovereignty,Territory and State-Making in South Asia, 1948–1951

The construction of territorial sovereignty is key to conceptions of modern states. Yet after the Partition of India and Pakistan in 1947, when both became independent from Britain, the precise nature of India’s relationship to Pakistan was open to some question. Was Pakistan a foreign country? Was India’s relationship to it international? This article uses the example of a dispute over water resources in the Indus Basin to highlight the process through which Indian officials in New Delhi’s External Affairs and Law ministries came to define Pakistan as constitutionally, as well as geographically, “outside” India between 1948 and 1951. Yet while Indian policy makers manoeuvred into an aggressive stance against Pakistan, both countries’ membership of the British Commonwealth implied an international relationship blurring the formal distinction between “domestic” and “foreign”. Negotiating the contradictions between Commonwealth rules and the desire to assert sovereignty over territory and resources, I argue, made Indian sovereignty contingent on circumstance.     

Tests of Hypotheses Arising In the Correlated Random Coefficient Model

This paper examines the correlated random coefficient model. It extends the analysis of Swamy (1971), who pioneered the uncorrelated random coefficient model in economics. We develop the properties of the correlated random coefficient model and derive a new representation of the variance of the instrumental variable estimator for that model. We develop tests of the validity of the correlated random coefficient model against the null hypothesis of the uncorrelated random coefficient model.     

Trading spaces: Calculating embodied Ecological Footprints in international trade using a Product Land Use Matrix (PLUM)

Nations import and export biophysical resources. With many ecosystems worldwide under mounting stress, countries may be increasingly interested in knowing the extent and origin of their ecological imports and dependencies. In this paper the Ecological Footprint is used as a tool to measure the biophysical (as opposed to financial) value of international trade flows. This paper attempts to answer the following question: How large of an Ecological Footprint does a given country exert inside the borders of each of its trading partners? Records in the UN COMTRADE bilateral trade database are multiplied by a matrix of per-product Footprint yield coefficients to translate from values in dollars and tonnes to units of hectares. The results show that the largest interregional flows are from Latin to North America, and from North America to Asia-Pacific. Grouping countries by GDP, high and middle income countries appear in Footprint terms to trade predominantly with other high and middle income countries and much less with low income countries.