Effective regulation versus tacit collusion in the long-distance market: an empirical analysis

Regulatory decisions often must be made in an atmosphere of uncertainty, and arguments presented by the affected parties frequently add to, rather than resolve, that uncertainty. Here, we examine several of the deregulatory decisions affecting the long-distance market that were rendered by the FCC over the two-decade period following the divestiture of AT&T. Our purpose is to provide empirical evidence relevant to some of the arguments regarding market conditions that were presented during that period. Findings suggest that some of the more prominent allegations are not supported by the data.      

Priority-driven behaviors under the Boston mechanism

We study school choice markets where the non-strategy-proof Boston mechanism is used to assign students to schools. Inspired by previous field and experimental evidence, we analyze a type of behavior called priority-driven: students have a common ranking over the schools and then give a bonus in their submitted preferences to those schools for which they have high priority. We first prove that under this behavior, there is a unique stable and efficient matching, which is the outcome of the Boston mechanism. Second, we show that the three most prominent mechanisms on school choice (Boston, deferred acceptance, and top trading cycles) coincide when students’ submitted preferences are priority-driven. Finally, we run some computational simulations to show that the assumption of priority-driven preferences can be relaxed by introducing an idiosyncratic preference component, and our qualitative results carry over to a more general model of preferences.     

How many educated workers for your economy? European targets,optimal public spending,and labor market impact

This paper studies optimal taxation schemes for education in a search-matching model where the labor market is divided between a high-skill and a low-skill sector. Two public policy targets - maximizing the total employment level and optimizing the social surplus - are studied according to three different public taxation strategies. We calibrate our model using evidence from thirteen European countries, and compare our results with the target from the Europe 2020 Agenda for achievement in higher education. We show that, with current labor market characteristics, the target set by governments seems compatible with the social surplus maximization objective for some countries, while being too high for other countries. For all countries, maximizing employment would imply higher educational spending than that required for the social surplus to reach its maximum.     

Beyond state-owned banks: Evidence from Shanghai bank customers

In light of a reformed and liberalized banking sector in China, this article sets out to examine the role of socio-demographic factors and customers’ banking experiences and priorities in customers’ selection of banks. As state-owned banks have long dominated the banking industry, the article also investigates the receptiveness of the Shanghai Chinese towards newer commercial banks, such as the joint-stock banks, and the penetration of foreign banks into China's banking industry. Comparing customers who use state-owned banks only and those who patronize joint-stock banks, it is found that education, income, age, occupation sector and location of hometown affects customers of state-owned banks only. Further, it is also found that state-owned banks remain dominant despite the opening up of the banking sector, and perception towards state-owned banks remains favourable.     

Endogenous Average Cost Based Access Pricing

We analyze an endogenous average cost based access pricing rule, where both the regulated firm and its rivals realize the interdependence among their outputs and the regulated access price. In contrast, the existing literature on access pricing has always assumed that the access price is exogenously fixed ex-ante. We show that endogenous access pricing neutralizes the artificial cost advantage that is enjoyed by the incumbent firm. Further, endogenous access pricing results in a consumer surplus that is equal to or higher than that under exogenous access pricing. If the entrant is more efficient than the incumbent, then the welfare under endogenous access pricing is higher than that under exogenous access pricing.     

Towards equilibrium offers in unit commitment auctions with nonconvex costs

We compare two types of uniform-price auction formats commonly used in wholesale electricity markets—centrally committed and self-committed markets. Auctions in both markets are conducted by an independent system operator that collects generator bids and determines which generators will operate and how much electricity each will produce. In centrally committed markets, generators submit two-part bids consisting of a startup cost and a variable energy cost. Self-committed markets force generators to incorporate their startup costs into a one-part energy bid. The system operator in a centrally committed system ensures that each generator recovers the startup and energy costs stated in its two-part bid, while no such guarantees are made in self-committed markets. The energy cost ranking and incentive properties of these market designs remains an open question. While the system operator can determine the most efficient dispatch with a centralized market, the auction mechanism used to solicit generator data compels generators to overstate costs. Self commitment might involve less efficient dispatch but have better incentive properties. We derive Nash equilibria for both market designs in a symmetric duopoly setting. We also derive simple conditions under which the two market designs will be expected cost-equivalent.     

Gender wage gap studies: consistency and decomposition

This paper reviews the empirical literature on the gender wage gap, with particular attention given to the identification of the key parameters in human capital wage regression models. This is of great importance in the literature for two main reasons. First, the main explanatory variables in the wage model, i.e., measures of work experience and time-out-of-work, are endogenous. As a result, applying traditional estimators may lead to inconsistent parameter estimates. Second, empirical evidence on the gender wage gap hinges on estimates of the parameters of interest. Accordingly, their economic meaning may be limited by restrictive assumptions included in wage models. This challenges both researchers and policymakers who require precise measures of the gender wage gap in order to create and enforce efficient equality policies. This paper is a substantially revised version of the first chapter of my thesis. I am grateful to Christian Dustmann and Wendy Carlin for their great support and comments. I also thank Bernd Fitzenberger, colleagues at the Norwegian School of Economics and Business Administration and IZA, and three anonymous referees for their helpful comments and suggestions.     

Policy Discrimination with and without Interpersonal Comparisons of Utility

Can the Pareto criterion guide policymakers who do not know the true model of the economy? If policymakers specify ex ante preferences for agents, then Pareto improvements from a distorted status quo are usually possible, and with more commodities than states, one can implement almost every Pareto optimum. Unlike the standard second welfare theorem, planners cannot dictate allocations: agents must trade. Unfortunately ex ante preferences impose interpersonal comparisons. If policymakers merely aim to maximize some social welfare function then optimal policies form an open set; hence small changes in the environment do not necessitate any policy response. Planners with symmetric information about agents can sometimes intervene without making interpersonal comparisons.     

What is unemployment in Europe? Concepts and measurement in the European community household panel

The purpose in this article is to evaluate the consistency between two measures of unemployment in a cross-country context. We use the European Community Household Panel to identify unemployment at an individual level based as well on the ILO criteria for being classified as unemployed as on the individual respondent reporting to be unemployed. This opens a unique opportunity to compare unemployment measured in two different ways based on a cross European Union panel study covering the years 1994 to 2001. The two main questions addressed in this article are to which extent the two unemployment measures differ and whether transition rates out of unemployment depend on which concept we use. Both questions are answered in the affirmative. The overall conclusion is that it is important, especially in some of the EU countries, to include both measures of unemployment as guidelines and indicators for policy.