Strip Clubs, “Secondary Effects” and Residential Property Prices

Municipalities regulate sexually oriented businesses (SOBs) through the “secondary effects” doctrine, which justifies limiting First Amendment speech protections inside SOBs. Negative effects of SOBs on nearby neighborhood quality are a frequently cited secondary effect. Little empirical evidence exists that SOBs generate such negative externalities. If SOBs generate negative externalities, then nearby property prices should decrease when a strip club opens. We estimate regression models of housing prices to determine the effect of new clubs on nearby residential property prices in Seattle, exploiting the termination of a 17‐year moratorium on openings and find no evidence that strip clubs have “secondary effects.”     

Bankruptcy costs, liability dollarization, and vulnerability to sudden stops

Countries with intermediate levels of institutional quality suffer larger output contractions following sudden stops of capital inflows than less developed nations. However, countries with strong institutions seldom experience significant falls in output after capital flow reversals. We reconcile these two observations using a calibrated DSGE model that extends the financial accelerator framework developed in Bernanke, Gertler and Gilchrist (1999). The model captures financial market institutional quality with creditors' ability to recover assets from bankrupt firms. Bankruptcy costs affect vulnerability to sudden stops directly but also indirectly by affecting the degree of liability dollarization. Simulations reveal an inverted U-shaped relationship between bankruptcy costs and the output loss following sudden stops.     

Cooperation in a risky world

We offer a novel investigation of the effect of environmental risk on cooperation in the Voluntary Contribution Mechanism. Our baseline is the standard setting, in which the personal return from the public good is deterministic, homogeneous, and publicly known. Our experimental treatments alter this classic design by making the marginal per capita return from the public good probabilistic. In the homogeneous risk (HomR) treatment, the random draw is made for the whole group, whereas in the heterogeneous risk (HetR) treatment, this happens independently for each group member. Our hypothesis is that different environmental risks may differently affect the ex post payoff inequalities, so that other‐regarding preferences (inequality aversion) may generate higher contributions in HomR than in HetR. Our main result is that the environmental risk does not affect the patterns of cooperation either in the one‐shot or in the finitely repeated version of the game. This suggests that the standard experimental methodology provides a robust and conservative measure of human cooperation.     

Corporate social responsibility: attributions,loyalty, and the mediating role of trust

This study investigates whether consumers’ perceptions of motives influence their evaluation of corporate social responsibility (CSR) efforts. The study reveals the mediating role of consumer trust in CSR evaluation frameworks; managers should monitor consumer trust, which seems to be an important subprocess regulating the effect of consumer attributions on patronage and recommendation intentions. Further, managers may allay the negative effects of profit-motivated giving by doing well on service quality perceptions. On the other hand, appropriately motivated giving continues to positively affect trust regardless of the performance of the firm on service quality provision.     

The Bioeconomics of Cooperation

When transactions and information are costly and exchange is non-simultaneous, ‘institutions matter’. They matter because exchange under these circumstances subjects the participants to potentially harmful behaviors by other participants, among which are: opportunistic behavior, agency, the free-rider problem, cheating, moral hazard, and adverse selection. Institutions constrain these behaviors, allowing the participants to take advantage of the gains from trade and specialization, and thereby facilitating cooperation. Individuals adhere to institutional rules because they gain by doing so. Because the individual gains are inseparable from the structure of the institutions, the institutions themselves necessarily become the focus of the analysis—as we see in the new institutional economics (NIE). The new group selection position in biology involves a similar shift in focus from the level of the individual to the group when studying the evolution of altruism. But some of the proponents of group selection go further, arguing that altruism in biology evolves because it is in the interest of the group, but not the individual. In fact, group level analysis is necessary in biology, as in the NIE, because it allows for the discovery of ‘institutions’ that constrain cheating, opportunistic behavior, etc., thereby making participation in the group in the long-run self-interest of the individual. This revised version was published online in August 2006 with corrections to the Cover Date.     

Assessing cost‐effectiveness when environmental benefits are bundled: agricultural water management in Great Barrier Reef catchments

Using economic analysis to prioritise improvements in environmental conditions is particularly difficult when multiple benefits are involved. This includes ‘bundling’ issues in agricultural pollution management, where a change in management action or farming systems generates multiple improvements, such as reductions in more than one pollutant. In this study, we conceptualise and compare two different approaches to analysing cost‐effectiveness when varying bundles of benefits are generated for a single project investment. Each approach requires data to be transformed in some way to allow the analysis to proceed. The index approach requires the transformation on the benefits side so that the effects of multiple pollutant changes can be combined into a measure for each project which can then be compared to costs. By comparison, the disaggregation approach requires the transformation on the costs side where costs for each project have to be apportioned across the different pollutants involved. The paper provides novel insights with an application to agricultural water quality improvements into the Great Barrier Reef in Australia, demonstrating that while both approaches are effective in prioritising projects by cost‐effectiveness, the disaggregation approach provides more insightful results and values that may be relevant for use as upper value guidelines in future project selection.     

Are patent fees effective at weeding out low‐quality patents?

The paper investigates whether patent fees are an effective mechanism to deter the filing of low‐quality patent applications. The study analyzes the effect on patent quality of the Patent Law Amendment Act of 1982, which resulted in a substantial increase in patenting fees at the U.S. Patent and Trademark Office. Results from a series of difference‐in‐differences regressions suggest that the increase in fees led to a weeding out of low‐quality patents. About 10% of patents in the lowest quality decile were filtered out, with the effect concentrated in the patents of firms whose overall patent portfolio was medium to large (more than 20 patents). The study has strong policy implications in the current context of concerns about declines in patent quality.