Bank capital requirements and mandatory deferral of compensation

We analyze the interplay of capital requirements and mandatory deferral of compensation in reducing banks’ risk taking incentives. Two heterogenous banks fund uncorrelated projects with fully diversifiable risk or correlated projects with systematic risk. One of both banks can identify project types and is superior at managing risks. If projects are in abundant supply, full mandatory deferral of compensation is optimal as it allows a larger banking sector without increasing the default risk. With limited supply of projects, deferred compensation may misallocate risky projects to the bank that is inferior at managing risks, so that early compensation may be optimal.     

Corporate pollution control strategies and labor demand: evidence from China’s manufacturing sector

The loss of employment is an essential issue that looms large in policy debates on pollution control. This paper estimates the impact of pollution reduction on labor demand in China’s manufacturing sector in the period 2001–2007. We conduct this research by using a sample with unbalanced panel data matched from two unique datasets of environmental statistics and an industrial economic database. Using the environmental performance of peer firms as the instrumental variable, our overall results show that improvements in environmental performance through reductions in \( SO _2\) emissions and COD emissions led to a statistically significant reduction in employment. On average, a 1% reduction in \( SO _2\) (COD) emissions causes a reduction in labor demand of approximately 0.018–0.019% (0.012–0.013%). We complement existing studies by carefully examining the impacts of firms’ different abatement strategies on labor demand. We find that pollution reduction through pollution prevention has substitutive effects on employment and that pollution reduction through pollution control at the end of the production process may require additional workers and thus has positive but not significant effects on labor demand. Finally, pollution control has heterogeneous effects on labor demand by different types of polluting firms (e.g., ownership, region, and industry).     

The effects of third party certification on voluntary self-regulation of accidents in the U.S. chemical industry

We explore whether the introduction of mandatory third party certification in 2005 under the Responsible Care program has reduced the probability and severity of accidents in participating facilities in the U.S. chemical industry. Using a sample of 10,315 observations from 1136 facilities owned by 566 RC and non-RC firms between 1996 and 2010, we estimate the average treatment effect of third party certification. We find that the difference-in-difference estimate of the average treatment effect is statistically insignificant. This result is robust to various model specifications including the potential endogeniety of third party certification due to a firm’s self-selection into RC.     

Price competition in the market for business telecommunications services

We estimate a two-step control-function model that relates incumbent prices for small-business telecommunications services to the number of facilities-based entrants, cost, demand, regulatory conditions, and a correction for endogenous market structure. Results show that the price effects from entry are understated in ordinary least squares regressions. When controlling for endogeneity, prices are negatively related to the number of entrants, indicating that markets without a competitive presence could exhibit market power. These findings should prove helpful to the Federal Communications Commission and other State regulators determining the conditions under which price and other forms of regulation may be relaxed.     

Incentive properties of coincident peak pricing

Coincident peak pricing is used in several electricity markets to recover the embedded cost of infrastructure, such as transmission. In this approach, measured consumption at the time of the peak is used to set charges for that pricing period or a subsequent period. If transmission costs are truly sunk, then such a recovery is unlikely to be efficient. However, in the context of growing peak demand, new additions must be built. We consider the incentive properties of coincident peak pricing when related investments are not considered to be sunk, finding that it can reproduce the incentive properties of an ideal time-varying price. We also consider several variations on this assumption.     

A theory of social license when regulatory pressure is jointly produced by an EPA and an NGO

We develop a model in which social pressure on a firm to behave well is jointly produced by a state regulator (EPA) and an NGO. The EPA and NGO differ in how they trade-off business versus environmental interests and also have access to different instruments in pursuit of their objectives. In particular, while the EPA will typically have the tools for detecting misbehaviour, the NGO can influence the intensity of social hostility directed towards those found to have misbehaved. EPA and NGO efforts may be strategic complements or substitutes, depending upon circumstances. We present a taxonomy of outcomes in the game between EPA and NGO in the spirit of Fudenberg and Tiroles’s (Am Econ Rev Pap Proc 74(2):361–366, 1984) classic taxonomy of business strategies. We also consider strategic delegation from NGO supporters to an NGO that has tastes over environmental and business interests different to their own.     

The role of cognitive ability and personality traits for men and women in gift exchange outcomes

We examine the role of cognitive ability and personality traits in a gift exchange experiment. Controlling for cognitive ability and personality characteristics, men offer higher wages than women, and men and women with greater cognitive ability and greater agreeableness on the Big Five personality scale offer higher wages as well. Men provide greater effort than women do, and respond to higher wage rates with greater increases in effort. For both genders, one standard deviation increases in agreeableness and in wages generate similar increases in effort. Serious biases arise from omitting cognitive ability and pooling men and women.     

Equilibrium selection in similar repeated games: experimental evidence on the role of precedents

We report on an experiment examining behavior and equilibrium selection in two similar, infinitely repeated games, Stag Hunt and Prisoner’s Dilemma under anonymous random matching. We are interested in the role that historical precedents may play for equilibrium selection between these two repeated games. We find that a precedent for efficient play in the repeated Stag Hunt game does not carry over to the repeated Prisoner’s Dilemma game despite the possibility that efficient play can be sustained as an equilibrium of the indefinitely repeated game. Similarly, a precedent for inefficient play in the repeated Prisoner’s Dilemma game does not extend to the repeated Stag Hunt game. We conclude that equilibrium selection between similar repeated games may have less to do with historical precedents and might instead depend more on strategic considerations associated with the different payoffs of these similar repeated games.     

The deep roots of economic development in the U.S. states: an application of Putterman and Weil (2010)

The “Deep Roots” literature investigates the effects of ancient cultural variables on economic outcomes. We extend Putterman and Weil’s (Q J Econ 125(4):1627–1682, 2010) inquiry into the effects of State History and Agricultural History to the economic output in ethnically and racially diverse fifty U.S. States. The ethnic and racial differences across the populations of the fifty U.S. states vary considerably due to historical immigration and slave flows that, as a result, produced radically different State History and Agricultural History scores across the states. Results derived from Putterman and Weil’s methodology do not robustly predict per capita levels of economic output across U.S. States. We also investigate the institutions channel, and find that they impact some measures of institutions, but they do not impact the quality of economic institutions which may be essential for promoting economic growth and development.     

Integrated bio-economic models as tools to support land-use decision making: a review of potential and limitations

Bio-economic modelling has become a useful tool for anticipating the outcomes of policies and technologies before their implementation. Advances in mathematical programming have made it possible to build more comprehensive models. In an overview of recent studies about bio-economic models applied to land-use problems in agriculture and forestry, we evaluated how aspects such as uncertainty, multiple objective functions, system dynamics and time have been incorporated into models. We found that single objective models were more frequently applied at the farm level, while multiple objective modelling has been applied to meet concerns at the landscape level. Among the objectives, social aspects are seldom represented in all models, when being compared to economic and environmental aspects. The integration of uncertainty is occasionally a topic, while stochastic approaches are more frequently applied than non-stochastic robust methods. Most multiple-objective models do not integrate uncertainty or sequential decision making. Static approaches continue to be more recurrent than truly dynamic models. Even though integrating multiple aspects may enhance our understanding of a system; it involves a tradeoff between complexity and robustness of the results obtained. Land-use models have to address this balance between complexity and robustness in order to evolve towards robust multiple-objective spatial optimization as a prerequisite to achieve sustainability goals.