The B.E. Journal of Economic Analysis & Policy

Published by De Gruyter

Volume 17 Issue 1 -

January 2017

Issue of The B.E. Journal of Economic Analysis & Policy

Submit manuscript

Contents
Journal Overview

Research Articles

January 21, 2017

The Market Value of R&D in Emerging Economies: Evidence from India

Sunil Kanwar, Bronwyn H. Hall

Article number: 20160103

Abstract

We revisit the relationship between market value and innovation in the context of manufacturing firms in a developing country, using data for Indian firms from 2001 through 2010. Surprisingly, we find that financial markets value the R&D investment of Indian firms the same or higher than it values such investment in developed economies such as the United States and European countries, suggesting some degree of underinvestment. The paper explores the use of a proxy for the option value of R&D and finds that this can account for a very small part of the R&D valuation (about 10 %). We also find that the market value–R&D relationship does not vary significantly across industry groups, although these results are rather imprecise.

February 28, 2017

Are You What You Eat? Healthy Behaviour and Risk Preferences

Matteo M. Galizzi, Marisa Miraldo

Article number: 20160081

Abstract

Abstract: We elicit and estimate risk preferences for a pool of young adults in the UK, and explore their links with healthy eating and risky health behaviours. We construct the Healthy Eating Index ( HEI ) as an overall indicator of nutritional quality, and we use it to complement the body mass index BMI . While for females we find no significant association between the BMI and risk preferences, males with high BMI appear more risk-seeking. However, this association disappears when controlling for the quality of the diet. For males, the HEI is significantly associated with risk preferences. Males smoking status is not associated with risk preferences.

November 29, 2016

The Impacts of Rural Property Rights on Urban Unemployment, Wage Inequality, and Welfare in Developing Countries

Jiancai Pi, Yang Ge, Jun Yin

Article number: 20150225

Abstract

This paper establishes a three-sector general equilibrium model to explore how rural property rights influence urban unemployment, skilled-unskilled wage inequality and social welfare in developing countries. Strengthened rural property rights generate the rent-gaining effect and the productivity-enhancing effect, and the interaction of these two effects determines the changes of urban unemployment, skilled-unskilled wage inequality and social welfare. In addition to the aforementioned two effects, the agricultural sector’s wage elasticity of unskilled labor demand also matters for the change of wage inequality.

December 28, 2016

Lobbying as a Guard against Extremism

Galina Zudenkova

Article number: 20160212

Abstract

This paper analyzes endogenous lobbying over a unidimensional policy issue. Individuals differ in policy preferences and decide either to take part in lobbying activities or not. They are assumed to be group rule-utilitarian such that they follow the rule that, if followed by everyone else in their special interest group, would maximize their group’s aggregate welfare. Once formed, lobbies make contributions to the incumbent government in exchange for a policy favor as in a common-agency model. I show the existence of equilibrium with two organized lobbies. Individuals with more extreme preferences are more likely to join lobbying activities. Therefore, the lobbyists are rather extremists than moderates. However, the competition between those extreme lobbies results in a more moderate policy outcome relative to that initially preferred by the biased government. Lobbies therefore guard against extremism, while acting as moderators of the government’s preferences.

March 1, 2017

Information Acquisition in Vertical Relations

Pio Baake, Andreas Harasser, Friederike Heiny

Article number: 20150211

Abstract

We analyse a simple supply chain with one supplier, one retailer and uncertainty about market demand. Focusing on the incentives of the supplier and the retailer to enhance their private information about the actual market conditions, we show that choices on information acquisition are strategic complements. While the retailer’s incentives are mainly driven by the information rent that he can earn, the supplier will choose to acquire information only if the retailer is rather well informed, even though the information is free of charge.

January 24, 2017

What Extent of Welfare Loss is Caused by the Disparity between Perceived and Scientific Risks? A Case Study of Food Irradiation

Masahide Watanabe, Yukichika Kawata

Article number: 20160071

Abstract

An individual perceived risk often differs from an objective risk based on the scientific evidence; risks about nuclear power generation and food technology including genetic modification and food irradiation are typical such cases. However, the extent to which welfare loss is caused by the disparity between perceived and scientific risks is unclear. Based on this gap in the literature, we conduct a discrete choice experiment to estimate the welfare loss. At the same time, we must tackle two issues arising in the estimation: endogeneity and ambiguity in the perceived risk. We construct an empirical model based on maxmin expected utility to consider ambiguity and apply a control function approach to alleviate endogeneity bias. The results show that 1) the disparity between perceived and scientific risks causes a significant welfare loss; 2) the ambiguity in the perceived risk exacerbates the welfare loss; and 3) endogeneity largely biases welfare measurement.

May 24, 2017

Characteristics and Employment of Applicants for Social Security Disability Insurance over the Business Cycle

Stephan Lindner, Clark Burdick, Javier Meseguer

Article number: 20160095

Abstract

We investigate the relationship between the unemployment rate and characteristics of applicants for Social Security Disability Insurance using administrative records of the universe of applicants between 1991 and 2008. As the unemployment rate rises, applications shift to those with higher work capacity who are rejected early in the eligibility determination process and have higher pre-application earnings and employment. However, post-application earnings and employment of denied applicants are slightly negatively related to the unemployment rate, suggesting that both compositional changes toward applications with higher work capacity and adverse economic conditions affect their employment and earnings.

February 7, 2017

Preferences Toward Leniency under Mandatory Criminal Sentencing Guidelines: Role-in-the-Offense Adjustments for Federal Drug Trafficking Defendants

Andrew W. Nutting

Article number: 20160177

Abstract

This paper tests whether judges and/or prosecutors manipulated mandatory federal sentencing guidelines to shorten prison sentences. It finds that, among drug traffickers convicted under the federal guidelines’ former mandatory sentencing system, those who faced harsher underlying charges were found to have played significantly lower-level roles in their conspiracies. This is consistent with guideline manipulation to help defendants facing longer sentences. Women received significantly larger role-in-the-offense reductions related to harsher underlying charges than men. Effects were insignificant if defendants were eligible for lower-cost alternative methods of sentence reduction, namely substantial assistance departures and safety-valve reductions from mandatory minimum sentences.

February 10, 2017

The Effect of Kinship Placement Laws on Foster Children’s Well-Being

Iryna Hayduk

Article number: 20160196

Abstract

This paper examines whether placing foster children with relatives, instead of unfamiliar caregivers, institutions, or group homes, increases the effectiveness of foster care and consequently improves children’s well-being. As a source of exogenous variation in kinship placement, I use recent major reform of foster care – state policies that prefer kin placement over other types of foster care settings. Using individual-level panel dataset, the Adoption and Foster Care Analysis and Reporting System (AFCARS), and employing difference-in-differences identification strategy, I find that in the short-run children exposed to law benefit from higher stability of placement and shorter length of foster care episode, but do not experience significant changes in either mental or physical health. In the longer term, kinship foster homes are more efficient in terms of improving safety and providing permanent home through discharge from foster care with a relative. Thus, given the effectiveness of kinship care, policymakers should focus on developing and implementing policies that further facilitate relatives’ involvement in foster care.

February 3, 2017

Are Immigrants in Favour of Immigration? Evidence from England and Wales

Nils Braakmann, Muhammad Waqas, John Wildman

Article number: 20160029

Abstract

Using the UK Citizenship Survey for the years 2007–2010, this paper investigates how immigrants view immigration and how these views compare to the views of natives. Immigrants who have been in the UK longer are similar to natives in being opposed to further immigration, while recent immigrants are more in favour of further immigration. Labour market concerns do not play a large role for either immigrants or natives. However, there is some evidence that financial and economic shocks can increase anti-immigration sentiments.

February 23, 2017

Competition, Product Innovation and Licensing

Ray-Yun Chang, Hong Hwang, Cheng-Hau Peng

Article number: 20160136

Abstract

This paper compares market profit and social welfare levels between differentiated Bertrand and Cournot duopoly. We start with a basic model in which a firm with a production technology can license its new technology to a potential rival who can use the technology to produce a differentiated product and compete with the incumbent firm. It is found that for any given technology level, Bertrand competition is necessarily more profitable but less socially desirable, due to its higher royalty rate. By contrast, if the licensee firm is an incumbent firm, the results hold if the technology level is high. Furthermore, if we assume the licensor firm can engage in product innovation and choose its optimal technology endogenously and the R&D efficiency is high (low), the welfare ranking is reversed (still holds).

February 14, 2017

The Impact of Educational Mismatches on Wages: The Influence of Measurement Error and Unobserved Heterogeneity

Sana Sellami, Dieter Verhaest, Walter Nonneman, Walter Van Trier

Article number: 20160055

Abstract

We investigate the differential impact of alternative combinations of horizontal and vertical educational mismatches on wages. By using panel data for Belgian graduates, we consider the role of unobserved worker heterogeneity. Random measurement error in both types of mismatches is accounted for by adopting instrumental variable techniques. We consistently find that overeducated individuals without field of study mismatch earn less than adequately educated workers with a similar educational background. However, for individuals who are working outside their field of study, such a wage penalty is not always observed once accounting for unobserved heterogeneity and random measurement error. In some cases, field of study mismatch even seems to be financially beneficial to the worker. These findings contribute to our understanding regarding the extent to which educational mismatches are truly problematic. The results call for policies that focus primarily on combatting vertical mismatches.

February 16, 2017

Education Outcomes of Children of Asian Intermarriages: Does Gender of the Immigrant Parent Matter?

Sukanya Basu, Michael Insler

Article number: 20160214

Abstract

Studies about the effects of native and immigrant intermarriage on the human capital of children generally ignore disparate impacts by gender, ethnicity, or other attributes. Using 2000 U.S. Census data, we compare the high school dropout rates of 16–17-year-old children of Asian intermarriages and intra-marriages. We study differences between Asian-father and Asian-mother only families, controlling for observable child, parental and residential characteristics, as well as unobservable selection into intermarriage. Despite the higher average education and income levels of intermarried families, the children of Asian-father-native-mother households have higher dropout rates compared to both Asian intra-married and Asian-mother-native-father households. Children of less-educated fathers do worse, relative to children of less-educated mothers, suggesting the importance of intergenerational paternal transmission of education. Racial self-identity is also important: Children identify as “non-Asian” more often when the mother is native, and their families may under-emphasize education bringing them closer to native levels.

Letters

February 9, 2017

Endogenous Leadership in Tax Competition: A Combination of the Effects of Market Power and Strategic Interaction

Jiancai Pi, Xuyang Chen

Article number: 20160191

Abstract

This paper extends Kempf and Rota-Graziosi (2010, “Endogenizing Leadership in Tax Competition.” Journal of Public Economics 94 (9):768–776) and Hindriks and Nishimura (2015, “A Note on Equilibrium Leadership in Tax Competition Models.” Journal of Public Economics 121:66–68) by jointly considering the effects of market power and strategic interaction in tax competition. We depict the regional asymmetry as different slopes and different vertical intercepts of the inverse demand for capital. In our setup, the risk-dominant equilibrium in which the large region leads is regained. Moreover, dissimilar to Kempf and Rota-Graziosi (2010, “Endogenizing Leadership in Tax Competition.” Journal of Public Economics 94 (9):768–776) and Hindriks and Nishimura (2015, “A Note on Equilibrium Leadership in Tax Competition Models.” Journal of Public Economics 121:66–68), we show that with a large market demand and a low capital endowment, the leadership by the large region can still be Pareto-dominant even if the asymmetry is very small.

February 14, 2017

Can Catastrophic Long-Term Care Insurance Policies Increase Private Insurance Coverage and Reduce Medicaid Expenditure?

Guoxuan Ma, Wei Sun

Article number: 20160243

Abstract

Using an inter-temporal optimization model of long-term care insurance purchase decisions, we evaluate catastrophic long-term care insurance policies that cover the tail risk of long-term care costs at affordable premiums. Under our baseline model, we show theoretically that introducing catastrophic policies will induce 11 percent of middle-income men and 3 percent of middle-income women to initiate private insurance coverage. As a result, Medicaid costs will be reduced by 0.20 percent and 0.19 percent for men and women, respectively.

February 16, 2017

Getting Girls to Schools! – Assessing the Impacts of a Targeted Program on Enrollment and Academic Performance

Somdeep Chatterjee

Article number: 20160248

Abstract

This is a short paper assessing the impacts of a targeted policy aimed to improve the quality of education for girls in India, i.e., the Kasturba Gandhi Balika Vidyalaya (KGBV) program. Under this program residential schools were built for girls in grades 6–8 (often known as middle school) and were unique because it is one of the few programs that exclusively focuses on improving school infrastructure for girls. The program was restricted to individuals belonging to backward castes in India which provides exogenous identifying variation. I use this eligibility criteria along with cohort variation in exposure to the program introduced in 2004 to estimate the impact of KGBV on enrollment and academic performance. I find that potentially affected cohorts are more likely to have attended school and perform better on reading tests. I run placebo regressions with data from a pre-policy year and do not find any effects along these dimensions providing confidence in the identification strategy.

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