The B.E. Journal of Economic Analysis & Policy Volume 14 Issue 4 -

The B.E. Journal of Economic Analysis & Policy

Volume 14 Issue 4 -

Contents
Journal Overview

Frontmatter

September 16, 2014 Page range: i-iv

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Advances

Financial Reforms and International Trade

Abdul Munasib, Devesh Roy, Xing Chen June 28, 2014 Page range: 1237-1281

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Abstract

We provide evidence that financial reforms (over 1976–2005) significantly affected exports, in particular, of industries with higher external capital dependence and low asset tangibility. The coverage of reforms is comprehensive, encompassing the banking sector, interest rates, equity and international capital markets. Our methodology improves upon existing studies by controlling for time-varying unobserved exporter characteristics and unobserved country-specific industry characteristics. We find significant effects of various reforms with diverse impacts by intensity. Further, event studies that incorporate possible anticipated and lagged effects of commencement of reform policies confirm the findings.

Re-thinking the Concept of Surplus: Embracing Co-creation Experiences in Economics

Avik Chakrabarti, Venkat Ramaswamy August 14, 2014 Page range: 1283-1297

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Abstract

Economics has traditionally split consumers from producers by assigning them fixed roles. In the Internetworked economy as it is becoming, this is no longer true as value is increasingly jointly created among individuals, as a function of their co-creation experiences . We construct a framework that reconnects economics with value creation that goes beyond artifacts as the central unit of analysis, toward platforms of engagements of which artifacts themselves are only a part. Engagement platforms are now both the means and ends of value creation, and economic theory must take into account both the potential value generated to individuals through “production” experiences of co-creating artifacts (through co-production engagement platforms), as well as co-creating “consumption” experiences (through co-consumption engagement platforms). We show how starting with joint value creation re-shapes our thinking about the nature of “surplus,” expanding traditional economic thinking about supply and demand toward a more convergent space of markets shaped by co-creation experiences.

Contributions

After-School Center-Based Care and Children’s Development

Christina Felfe, Larissa Zierow May 6, 2014 Page range: 1299-1336

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Abstract

What is the impact of after-school center-based care on the development of primary school-aged children? Answering this question is challenging due to non-random selection of children into after-school center-based care. We tackle this challenge using detailed data of the German Child Panel and employing a value-added method. While we do not find significant effects on average, our analysis provides evidence for beneficial returns to after-school center-based care attendance for more disadvantaged children. To be more precise, children of less educated mothers and low-income families benefit from attending after-school care centers in terms of their socio-behavioral development.

The Effect of Family Background on Student Effort

Zoë Kuehn, Pedro Landeras May 17, 2014 Page range: 1337-1403

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Abstract

Students from more advantageous family backgrounds tend to perform better than those from less advantageous backgrounds. But it is not clear that these students exert more effort. We build a model of students, schools, and employers to study the interaction of family background and effort exerted by the student in the education process. Two factors turn out to be key in determining the relationship between effort and family background: (i) the student’s attitude toward risk and (ii) how the student’s marginal productivity of effort depends on her family background. We show that when the degree of risk aversion is relatively low (high) compared to the sensitivity of the marginal productivity of effort, students from more advantageous family backgrounds exert more (less) effort. Empirically, we find that if parental education was reduced from holding a university degree to incomplete compulsory education, primary and secondary school students would exert around 21–23% less effort (approximately equal to a reduction of 2 hours weekly in homework). For primary school students we also find that marginal productivities of effort are higher for those from less advantageous family backgrounds.

Policy Uncertainty and Technology Adoption

Mohammad H. Dehghani June 7, 2014 Page range: 1405-1430

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Abstract

This paper considers technology adoption under both technological and subsidy uncertainties. Uncertainty in subsidies for green technologies is considered as an example. Technological progress is exogenous and modeled as a jump process with a drift. The analytical solution is presented for cases when there is no subsidy uncertainty and when the subsidy changes once. The case when the subsidy follows a time invariant Markov process is analyzed numerically. The results show that improving the innovation process raises the investment thresholds. When technological jumps are small or rare, this improvement reduces the expected time before technology adoption. However, when technological jumps are large or abundant, this improvement may raise this expected time.

Competing Activities in Social Networks

Mohamed Belhaj, Frédéric Deroïan July 24, 2014 Page range: 1431-1466

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Abstract

We consider a society in which each agent has one unit of a resource to allocate between two activities. Agents are organized in a social network, and each activity generates complementarities between neighbors. We find multiplicity of equilibrium for high intensity of interaction, and we characterize equilibria in terms of specialization and polarization. Overall, results reveal the crucial role played by network geometry. The results also suggest that the structure of the social network should be taken into account for the design of a public policy in favor of a specific activity.

The Value of Postponing Pregnancy: California’s Paid Family Leave and the Timing of Pregnancies

Shirlee Lichtman-Sadot July 22, 2014 Page range: 1467-1499

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Abstract

Conditioning a monetary benefit on individuals’ family status can create distortions, even in individuals’ seemingly personal decisions, such as the birth of a child. Birth timing and its response to various policies has been studied by economists in several papers. However, pregnancy timing – i.e. the timing of conception – and its response to policy announcements has not been examined. This paper makes use of a 21-month lag between announcing California’s introduction of the first paid parental leave program in the United States and its scheduled implementation to evaluate whether women timed their pregnancies in order to be eligible for the expected benefit. Using natality data, documenting all births in the United States, a difference-in-differences approach compares California births to births in states outside of California before the program’s introduction and in 2004, the year California introduced paid parental leave. The results show that the distribution of California births in 2004 significantly shifted from the first half of the year to the second half of the year, immediately after the program’s implementation. While the effect is present for all population segments of new mothers, it is largest for disadvantaged mothers – with lower education levels, of Hispanic origin, younger, and not married. These results shed light on the population segments most affected by the introduction of paid parental leave and on the equitable nature of paid parental leave policies.

Technological Progress and the Environmental Kuznets Curve in the Twenty Regions of Italy

Donatella Baiardi August 13, 2014 Page range: 1501-1542

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Abstract

The paper explores the relationship between per capita income and three air pollutants, CO, NMVOCs, and SO x , using a novel dataset based on the 20 regions of Italy. Given the central role of technological progress in long-term environmental problems, we empirically investigate the influence of innovation on the environmental Kuznets curve (EKC). The estimation results validate the existence of an EKC for the three air pollutants considered. Furthermore, the influence of innovation on the inverse-U-shaped curve identified by the theoretical literature is in general empirically confirmed. Finally, the same conclusions also hold when using another dataset related to the aggregate national economy rather than separate regions.

Designated Driver Service Availability and Its Effects on Drunk Driving Behaviors

Jinhwa Chung, Hailey Hayeon Joo, Seongman Moon August 13, 2014 Page range: 1543-1567

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Abstract

Designated driver service in Korea offers a convenient and affordable solution for drunk drivers to reach their destinations with their own vehicles. We investigate the influence of this service availability on drunk driving behaviors, using Korean panel data from 1998 to 2011. We find that an increase in designated driver firms significantly reduces both alcohol-involved and total traffic fatality rates, while the effects of well-known deterrence policies are weak. This result is further supported by a counterfactual analysis which compares the effect of the service on traffic fatality rates in daytime to those in nighttime when the rate of the service use is substantially higher.

Topics

Environmental Taxes in Duopoly with Soft Capacity Constraints

Henrik Vetter February 11, 2014 Page range: 1569-1584

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Abstract

This paper examines an environmental tax when duopolistic firms engage in capacity-price competition. Under soft capacity constraints, the equilibrium ranges from Bertrand competition to Cournot competition, depending upon parameters. It is shown that a unit tax potentially changes the qualitative nature of equilibrium. That is, the type of tax affects the mode of competition between firms. This effect gives rise to the result that a unit tax is sometimes an inefficient instrument. The explanation is that the tax that leads to the first-best under Cournot competition will in fact sustain Bertrand competition, and vice versa.

The Impact of Korea’s Green Growth Policies on the National Economy and Environment

Won-Sik Hwang, Inha Oh, Jeong-Dong Lee May 3, 2014 Page range: 1585-1614

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Abstract

The Korean government has recently established national and sectoral mid-term greenhouse gas (GHG) reduction targets. Specifically, the country must reduce its total GHG emissions by 30% compared to business-as-usual (BAU) by 2020. This study has two main purposes. First, the study aims to measure the economic impacts of pursuing and achieving the government’s GHG reduction targets. Second, it aims to estimate each major policy’s potential GHG emission reductions in the various sectors. We use the computable general equilibrium model and develop three scenarios to examine the economic and environmental impacts of Korea’s green growth policies – a baseline scenario wherein the national economy proceeds without green growth policies; scenario A, wherein the government imposes national and sectoral emission reduction targets without adopting green technologies; and scenario B, wherein the government adopts policy and technology as renewable portfolio standard and carbon capture and storage. The simulation results from scenario A indicate that the government’s mid-term targets could pose a significant challenge to Korea’s national economy. In addition, the results from scenario B indicate that low-carbon green policy and technology will play an important role in reducing GHG emissions.

Microfinance Regulation and Market Development in Latin America

Veronica Trujillo, Fernando Rodriguez-Lopez, Victoria Muriel-Patino May 23, 2014 Page range: 1615-1644

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Abstract

The evolution and development of microfinance markets is conditioned by external factors such as macroeconomic variables, institutional country level, availability of conflict resolution mechanisms, informal sector features, and applicable regulation. A careful design of the latter aspect is needed because it can either be a tool for promotion (by facilitating and making flexible microfinance institutions activities) or a restriction to market development by setting unnecessary limits or requirements. Considering these ideas, this paper analyzes the relationship between regulatory frameworks for microfinance in 17 Latin American countries and the level of development and specific features in its corresponding microfinance markets.

Producer Liability and Competition Policy When Firms Are Bound by a Common Industry Reputation

Andrzej Baniak, Peter Grajzl, A. Joseph Guse May 3, 2014 Page range: 1645-1676

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Abstract

We contrast the laissez-faire regime with the regime of strict producer liability and draw the implications for competition policy in a setting where oligopolistic firms cannot differentiate themselves from rivals but rather are bound by a common industry reputation for product safety. We show that, first, unlike in the traditional products liability model, firms’ incentives to invest in precaution depend on market structure. Second, depending on the magnitude of expected damages awarded by the courts, laissez-faire can welfare dominate strict producer liability. Third, the relationship between social welfare and industry size, and hence the role for competition policy, depends on the institutional regime governing the industry. Under some circumstances, restricting industry size is unambiguously welfare-enhancing.

Effect of Work–Life Balance Practices on Firm Productivity: Evidence from Japanese Firm-Level Panel Data

Isamu Yamamoto, Toshiyuki Matsuura February 1, 2014 Page range: 1677-1708

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Abstract

This article examines how firm practices that could contribute to worker attainment of work – life balance (WLB) affect the total factor productivity (TFP) of a firm, by using panel data of Japanese firms from the 1990s. We observed a positive correlation between the WLB practices and TFP among sampled firms. However that correlation vanished when we controlled for the unobserved firm heterogeneity, and we found no general causal relationship in which WLB practices increase firm TFP in the medium or long run. For firms with the following characteristics, however, we found positive and sizable effects: large firms, manufacturing firms, and firms that have exhibited labor hoarding during recessions. Since these firms are likely to incur large fixed employment costs, we infer that firms investing in firm-specific human skills or having large hiring/firing costs can benefit from WLB practices through a decrease in turnover or increase in recruiting effectiveness.

The Role of Risk Preference in Immigration and Minimum Wage Policies

Yulian Wang, Hongfei Zhu July 12, 2014 Page range: 1709-1724

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Abstract

This paper examines the effects of two enforcement policies and a minimum wage policy in controlling illegal immigration and improving welfare when capital is immobile. The model highlights the importance of the role of risk preference by considering various attitudes to risk held by illegal immigrants and host firms. It is shown that the effect of internal enforcement on the wage rate in host firms depends on the attitude to risk of illegal immigrants and host firms. It is also shown that the impacts of the minimum wage legislation differ according to risk preference and the degree of labor employment elasticity to the source wage. Moreover, attitude to risk is shown to be important in determining the effectiveness of policies on welfare.

About this journal

Objective
The B.E. Journal of Economic Analysis & Policy (BEJEAP) welcomes submissions that employ microeconomics to analyze issues in organizational economics, consumer behavior, and public policy. Articles submitted to BEJEAP can come in two formats: research papers and letters. Authors should bring to their analysis whatever microeconomic theoretical, experimental or econometric tools are helpful. We publish both empirical work and applied theory (though not more abstract forms of applied theory), and our aim is to disseminate papers that have practical implications for public policy, organizational or individual decision making.

Topics

Design of organizations and institutions
Industrial organization
Health economics
Public finance
Labour Economics
Economics of education, family, development, law, or the environment
Effects of domestic and international policy

Article formats
Research Papers, Letters

> Information on submission process