Technology,education, and economic growth in Sub-Saharan Africa

This study examines whether telecommunications infrastructure promotes economic growth in countries with better access to education compared to those with less access. Using a panel of 45 Sub-Saharan African countries from 1993 to 2015, the results using the fixed-effects, two-step feasible efficient generalized method of moments estimator indicate that in countries with better access to education, the Internet contributes to economic growth, while mobile phones do not seem to do so. These results suggest that while education is regarded as pivotal for the Internet, it seems to be irrelevant for mobile phone usage.     

The reaction of firm ex ante cost of equity capital to the resolution of shareholder class action lawsuits

Existing research provides evidence that providers of capital (banks, public debt, and equity) all increase the expected return on securities after the initiation of a shareholder lawsuit. Many of these lawsuits are dismissed or settled with trivial monetary penalties, which suggests that an across-the-board permanent increase in the cost of capital is misguided. After estimating the probable outcome of a shareholder lawsuit using only information available at the time the shareholder lawsuit is filed, we study the resolution of shareholder lawsuits to determine if market participants adjust their expected return after a case is resolved. We find an increase (decrease) in the ex ante cost of equity capital when there is a surprise settlement (dismissal), which is consistent with an efficient market. Further, we present evidence consistent with equity market participants monitoring the progress of shareholder lawsuits prior to resolution. Overall, our results suggest that firm ex ante cost of equity capital only changes after the resolution of a shareholder lawsuit if the outcome of the case is different than initially predicted.     

Non-discriminatory donation relief and strategic commitment under political competition

Tax relief for private donations towards the provision of collective goods can protect minorities from majority-driven outcomes in which tax revenues are exclusively used to finance the provision of public goods that are only valued by the majority. In this paper we show that non-discriminatory tax relief for private donations can arise in political equilibrium as a strategic commitment device aimed at creating and supporting political alliances that would not otherwise be able to coalesce.     

Research and development and trade policies for product innovation in the presence of foreign competition

This paper examines two policy instruments — a matching grant and import tariffs — for encouraging research and development (R&D) in product innovation by a domestic firm when it faces foreign competition. We do so by developing a theoretical model of product innovation where R&D effort is endogenous and its outcome uncertain. We examine the effects of a reduction in import tariffs on private expenditure on R&D, on public support for such R&D, and on total R&D expenditure. We find that in response to a reduction in import tariffs, the domestic firm always reduces its private R&D investments, but the total level of R&D expenditure (i.e., including public support) might go up depending on the level of tariffs. In particular, we find that it will go up if the initial level of tariff is higher than a critical level. When tariff is endogenous, we find that the socially optimal level of tariffs is positive. One finding that is of particular interest is that supporting private attempts to product innovate in the form of a matching grant program leads to a socially optimal level of product R&D.     

The fallacy of Washington consensus and the role of the Government: interpreting some Chinese contributions to development policy from aspects of Chang’e 4

Students of economics may have heard of that economics, especially the kind of mainstream neoclassical economics taught in most universities on earth today, is an imitation of physical science in some fundamental fashion. However, few economists would imagine that economics can be as effective as physical science, not even in the remote future. China’s Chang’e 4 mission to the far side of the Moon provides a golden opportunity for economists to explore this fascinating possibility from the aspect of astrodynamics.

This article, inspired by thoughts of Justin Yifu Lin and Angang Hu among others regarding China’s economic reform, demonstrates that physics explaining the Three-Body Problem of classical mechanics may as well be understood as guiding principles when dealing with issues in development economics. Several aspects of ‘Washington consensus’ are examined in relation to the concerns raised by Chinese scholars. The study concludes that neoliberal interpretations of modern economics are basically inconsistent with the neoclassical framework outlined in standard economics textbooks.     

From central planning towards a market economy: The role of ownership and competition in Vietnamese firms’ productivity

This paper examines the role of ownership and market competition in Vietnamese firms’ total factor productivity (TFP) from 2001 to 2011. Making use of a large panel dataset of manufacturing firms, we find that, on average, both foreign-owned enterprises (FOEs) and state-owned enterprises (SOEs) have performed better than privately owned enterprises (POEs) in terms of their TFP levels. However, while FOEs’ TFP ranked the highest in the period 2001–2006, SOEs “closed the gap” in the period 2007–2011. Moreover, we find that market competition has been effective in enhancing average firm productivity and in reducing the gaps in efficiency across ownership types. SOEs’ remarkable performance may be linked to several concurrent factors experienced during the period 2001–2011, namely, the process of restructuring the state sector during the 2000s, the increased economic integration due to the country's accession to the World Trade Organization (2007) and, finally, the preferential access to financial capital and land granted to SOEs. While some evidence supports SOEs’ equitization as an explanation for their remarkable productivity performance, WTO accession and cheaper access to inputs do not fully explain it.     

Expected work experience and the gender wage gap: A new human capital measure

Work experience is a key variable in earnings function estimates and wage gap decompositions. Because data on actual work experience are rare, studies commonly use proxies, such as potential experience. But potential experience is identical for all individuals of the same age and level of education, so it ignores labor market intermittency because of childbirth and child rearing—a critical omission when analyzing gender differences in earnings. This paper constructs a better proxy: expected work experience, which is the sum of the annual probabilities that an individual worked in the past. This measure can be generated using commonly available data on labor force participation rates by age and gender to gauge the probability of past work. Applying the measure to labor force survey data from the Philippines shows that conventional proxies underestimate the contribution of gender differences in work experience in explaining the gender wage gap.     

The colonial origins of fiscal capacity: Evidence from patronage governors

We combine historical personnel data from the British colonial administration with modern public finance data to study the impact of colonial governors on fiscal capacity. Exploiting rule-based variation in the allocation of governors connected to their superior at the time of appointment, we find that modern-day countries exposed to more patronage governors exhibit lower fiscal capacity today. These negative effects are persistent over time and driven by indirect taxes that patronage governors disproportionately controlled in the colonial period. The results thus provide evidence for a public finance channel through which the effects of patronage appointments extend beyond decolonization.     

Hierarchy Leadership and Social Distance in Charitable Giving

This article investigates the effect of hierarchy leadership and social distance on prosocial behavior in a field experimental setting of sequential charitable giving conducted in an organization. The treatments vary in whether the leading (first) donor's identity is revealed to the following donors as a hierarchy leader, a peer, or a stranger. The followers' giving in the Leader and Peer treatments responds positively to the leader's giving, but no significant response is found in the Stranger treatment. However, on average, the followers in the Leader treatment give less than those in both the Peer and Stranger treatments. This is due to a negative effect on the followers' giving when the leaders contribute a small amount in the Leader treatment.