Accidental Bequests: A Curse for the Rich and a Boon for the Poor*

When accidental bequests signal otherwise unobservable individual characteristics, such as productivity and longevity, the population should be partitioned into two groups: those who do not receive an inheritance and those who do. The first tagged group receives a Mirrlees second‐best tax schedule; the second group, when its type is fully revealed, faces a first‐best tax schedule. Receiving an inheritance makes high‐ability types worse off and low‐ability types better off. High‐ability individuals face a bequest tax of more than 100 percent, while low‐ability types face a bequest tax that can be smaller, as well as larger, than 100 percent, and it might even be negative.     

Competition in Two-Sided Markets with Common Network Externalities

We study competition in two-sided markets with a common network externality rather those than with the standard inter-group effects. This type of externality occurs when both groups benefit, possibly with different intensities, from an increase in the size of one group and from a decrease in the size of the other. We explain why common externality is relevant for the health and education sectors. We focus on symmetric equilibrium and show that when the externality itself satisfies a homogeneity condition then platforms’ profits and price structures have some specific properties. Our results reveal how the rents coming from network externalities are shifted by platforms from one side to the other, according to the homogeneity degree. Prices are affected but in such a way that platforms only transfer rents from consumers to providers. In the specific but realistic case where the common network externality is homogeneous of degree zero, platforms’ profits do not depend on the intensity of the (common) network externality. This result differs from those of the two-sided models, which deal with standard positive inter-group network externality.     

Second-Best Pollution Taxes and the Structure of Preferences

We characterize optimal taxes on polluting and nonpolluting goods in Ramsey and Mirrlees second-best environments. The polluting good tax differs from the Pigouvian tax by Ramsey terms in the first and by Stiglitz/Mirrlees plus another adjustment term in the second. These terms can be positive, negative, or zero. If preferences are weakly separable in public and private goods, with the private good subutility weakly separable in labor and produced goods, nonpolluting goods are taxed uniformly and the concept of a tax differential between polluting and nonpolluting goods is well defined. The differential is then less than the Pigouvian tax in the Ramsey framework, but it can be greater, equal to, or smaller than the Pigouvian tax in the Mirrlees second best. In Mirrlees second best, if preferences are separable in labor supply and other goods, the second-best tax differential is identical to the Pigouvian tax.     

Feel Good,Do-Good!? On Consistency and Compensation in Moral Self-Regulation

Studies in the behavioral ethics and moral psychology traditions have begun to reveal the important roles of self-related processes that underlie moral behavior. Unfortunately, this research has resulted in two distinct and opposing streams of findings that are usually referred to as moral consistency and moral compensation. Moral consistency research shows that a salient self-concept as a moral person promotes moral behavior. Conversely, moral compensation research reveals that a salient self-concept as an immoral person promotes moral behavior. This study’s aim was to integrate these two literatures. We argued that compensation forms a reactive, “damage control” response in social situations, whereas consistency derives from a more proactive approach to reputation building and maintenance. Two experiments supported this prediction in showing that cognitive depletion (i.e., resulting in a reactive approach) results in moral compensation whereas consistency results when cognitive resources are available (i.e., resulting in a proactive approach). Experiment 2 revealed that these processes originate from reputational (rather than moral) considerations by showing that they emerge only under conditions of accountability. It can thus be concluded that reputational concerns are important for both moral compensation and moral consistency processes, and that which of these two prevails depends on the perspective that people take: a reactive or a proactive approach.     

When new product development fails in China: mediating effects of voice behaviour and learning from failure

This paper investigates conflicts following a new product development (NPD) failure. Conducted in a Chinese business setting, the study examines whether voice behaviour and learning from failure mediate the relationship between task- and emotional conflict emerging from NPD failure. Our findings indicate that voice behaviour and learning from failure are necessary to effectively reduce task and emotional conflict and thus to enhance future NPD. Specifically, it is revealed that emotional conflict leads to a reduced level; and that voice behaviour and learning from failure are significant mediators that influences the relationships between emotional and task conflicts with it.     

Designing a linear pension scheme with forced savings and wage heterogeneity

This paper studies the optimal linear pension scheme when society consists of rational and myopic individuals. Myopic individuals have, ex ante, a strong preference for the present even though, ex post, they would regret not to have saved enough. While rational and myopic persons share the same ex post intertemporal preferences, only the rational agents make their savings and labor supply decisions according to these preferences. Individuals are also distinguished by their productivity. The social objective is “paternalistic”: the utilitarian welfare function depends on ex post utilities. We examine how the presence of myopic individuals affects both the size of the pension system and the degree of redistribution it operates, with and without liquidity constraints. The relationship between proportion of myopic individuals and characteristics of the pension system turns out to be much more complex than one would have conjectured. Neither the impact on the level of pensions nor the effect on their redistributive degree is unambiguous. Nevertheless, we show that under some plausible assumptions adding myopic individuals increases the level of pension benefits and leads to a shift from a flat or even targeted scheme to a partially contributory one. However, we also provide an example where the degree of redistribution is not a monotonic function of the proportion of myopic individuals.      

International Sister-Cities: Bridging the Global-Local Divide

With the demise of the sharp urban-rural divide as a framework for urban analyses, debates have arisen regarding the utility of the city as a theoretically significant construct. Recently however, the growing emphasis on globalization has brought the analysis of global cities into sharp focus. The countervailing trend emphasizes the significance of the local. International sister-cities provide a site of analysis which illustrates the global-local interface and yet delves deeper. Initially conceived as a post-war means of developing friendships and cultural ties, sister-cities were based on similarities such as name or economic function. More recently, greater recognition has been given to the economic foundations and benefits of these connections. Providing an extension to an integrated approach to the study of sister-cities based on the multifold relationship between culture and commerce, this paper adds a further dimension by focusing on simultaneously operating multi-level entrepreneurial partnerships necessary to sustain active sister-city relationships. Drawing on New Zealand examples of twinning arrangements, it is demonstrated that the emergence and development of embedded partnership ties is vital to deriving sustainable economic and social benefits. While the global outreach of the sister-cities phenomenon appears to transcend the geographic confines of cities, strong locality considerations and local activism nevertheless predominate. A novel feature of this paper is the conceptualization of a hybrid form of entrepreneurialism, municipal-community entrepreneurship, which is argued as a valuable facilitator of the economic and social vibrancy of cities. to the two cities, it is broadening out to include cultural and work exchanges.     

The Political Economy of Social Security

We consider a two-period overlapping generations model in which individual voters differ by age and by productivity. In such a setting, a redistributive pay-as-you-go system is politically sustainable, even when the interest rate is higher than the rate of population growth. The workers with medium wages (not those with the lowest wages) and the retirees form a majority which votes for a positive level of social security. This level depends on the difference between the rates of population growth and interest as well as on the redistributiveness of the benefit rule.