RePEc: Research Papers in Economics
Research Papers in Economics is a collaborative effort of hundreds of volunteers in many countries to enhance the dissemination of research in economics.
School of Economics and Finance Discussion Papers and Working Papers Series
2012
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#296Download full text
- JEL-Codes:
- H26; D63; E60
- Keywords:
- Tax Evasion; Inequality; Political Economy
Tax Evasion, Inequality and Progressive Taxes: A Political Economy Perspective Joseph
This paper revisits the original Allingham and Sandmo (1972) framework with a view towards addressing the issue of tax compliance, and examining the political economy implications of tax evasion for progressivity in the tax structure. In so doing, we ‘start from scratch’ by constructing a simple extension of the basic Allingham and Sandmo construct that allows agents to initially decide whether to evade taxes or not. We then use a step-by-step model building procedure by taking both the basic model and its ‘evade-or-not’ counterpart towards a dynamic macroeconomic framework. We find that the 'evade or not' assumption has strikingly different and more realistic implications for the extent of evasion, and demonstrate that it is a more appropriate modeling strategy in the context of macroeconomic models. Furthermore, our numerical analysis suggests that the political outcome for the tax rate for a given level of inequality is conditional on whether there is a large or small or large extent of evasion in the economy, although changes in inequality do not matter for this outcome.
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#295Download full text
- JEL-Codes:
- O1; O3
- Keywords:
- political economy, overlapping generations model, growth and inequality, technology adoption, redistribution
Financial Intermediation and Costly Technology Adoption under Uncertainty: A Political Economy Perspective
We develop a stochastic political economy model to explain the trade-off between growth and inequality during the process of technology adoption. In the model endogenous growth occurs through physical and human capital deepening. Agents can adopt either of the two risky high-return technologies, one of which is only available to those who can afford the entry cost associated with financial intermediation. We assume that this entry cost depends on the proportion of government revenue that is allocated towards cost-reducing financial development expenditure, and that agents decide on this proportion through a voting mechanism. The results show that certain interest groups comprising of both the poorest and the richest agents block the policies that are aimed at allocating resources towards costreducing financial development expenditure in the early stages of the economy’s development. However, as redistribution continues from generation to generation, the middle of the distribution successively becomes thicker and consequently the majority of agents start supporting reallocation in the form of cost-reducing financial development expenditure. In the transition to the steady state, inequality patterns show recurring ‘Kuznets-like curves’. Furthermore, high initial inequality tends to hasten the pace at which growth and inequality converge towards the steady state paths, while low inequality result in more fluctuations in transitional growth and inequality. Finally, our results show that although the political outcomes do not coincide with the welfare maximisation outcomes in the early and the transitional stages of the economy, the two outcomes eventually converge in the long-run.
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#294Download full text
- JEL-Codes:
- L83, J0, M0, Z13
- Keywords:
- Organizational identification; superstars; role model; fans; soccer
The Influence of Superstars on Organizational Identification of External Stakeholders: Empirical Findings from Professional Soccer
This paper examines the effect of superstars on external stakeholders' organizational identification through the lens of sport. Drawing on social identity theory and the concept of organizational identification, as well as on role model theories and superstar economics, we develop several hypotheses regarding the influence of soccer stars on their fans' degree of team identification. Using a proprietary dataset including archival data on professional German soccer players and clubs as well as survey data of more than 1,400 soccer fans, we find evidence for a positive effect of superstar characteristics and role model perception. We further find that players who measure up to the definition of a superstar are more important to fans of established teams than to fans of unsuccessful teams. The player's club tenure, however, seems to have no influence on fans' team identification. We argue that the effect of soccer stars on their fans is comparable to that of CEOs on their organizations' external stakeholders and consequently apply our results to the business domain. Our results contribute to organizational identification research by extending the list of determinants related to individual persons.
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#293Download full text
- JEL-Codes:
- J16; J24
- Keywords:
- QuBE, Research Productivity, Human Capital, Graduate Education, Gender Differences
Are all High-Skilled Coherts Created Equal? Unemployment, Gender, and Research Productivity
Using life cycle publication data of 9,368 economics PhD graduates from 127 U.S. institutions, we investigate how unemployment in the U.S. economy prior to starting graduate studies and at the time of entry into the academic job market affect economics PhD graduates' research productivity. We analyze the period between 1987 and 1996 and find that favorable conditions at the time of academic job search have a positive effect on research productivity (measured in numbers of publications) for both male and female graduates. On the other hand, unfavourable employment conditions at the time of entry into graduate school affects female research productivity negatively, but male productivity positively. These findings are consistent with the notion that men and women differ in their perception of risk in high skill occupations. In the specific context of research-active occupations that require high skill and costly investment in human capital, an ex post poor return on undergraduate educational investment may cause women to opt for less risky and secure occupations while men seem more likely to “double down” on their investment in human capital. Further investigation, however, shows that additional factors may also be at work.
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#292Download full text
- JEL-Codes:
- L83; D81; D03; J15
- Keywords:
- Perception of chances, unrealistic optimism, ipsative possibility set, integration effects, soccer
What Shapes Young Elite Athletes' Perception of Chances in an Environment of Great Uncertainty?
Unrealistic optimism is a commonly observed bias in the perception of chances. In this paper, we examine whether the bias is also present among young elite soccer players (10 to 23 years old) who receive regular objective feedback through external assessments. Utilising a large unique data set of almost 1600 individuals allows us to explore the empirical validation of the ipsative theory of human behaviour. In particular, we analyse how factors such as age or experience, education, peer group performance, and the level of integration into culture exert influence over young elite athletes' perceived chance of becoming a professional player. Working with a homogeneous dataset of individuals possessing similar characteristics and professional goals allows us to control for and isolate (unobserved) factors that may shape perceptions.
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#291Download full text
- JEL-Codes:
- D71; A14
- Keywords:
- Fellows of the Econometric Society, Nobel Laureate, economics of science, awards.
Econometric Fellows and Nobel Laureates in Economics
An academic award is method by which peers offer recognition of intellectual efforts. In this paper we take a purely descriptive look at the relationship between becoming a Fellow of the Econometric Society and receiving the Nobel Prize in economics. We discover some interesting aspects: of all 69 Nobel Prize Laureates between 1969 and 2011, only 9 of them were not also Fellows. Moreover, the proportion of future Nobel winners among the Fellows has been quite high throughout time and a large share of researchers who became Fellows between the 1930s and 1950s became Nobel Laureates at a later stage. On average, researchers become Fellows relatively early in their career (14.9 years after their PhD) and those who were subsequently made Nobel Laureates become Fellows earlier than other researchers. Interestingly, Harvard and MIT have been the dominant PhD granting institutions to generate Fellows and Nobel Laureates in the past.
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#290Download full text
- JEL-Codes:
- C23;C25;I31
- Keywords:
- Happiness methodology, life satisfaction, endogenous, models, age effects, personality effects, stress, change, life shocks, variables, aggregate, time series
Do changes in the lives of our peers make us unhappy?
In this paper, we seek to explain the changes in aggregate happiness over the lifecycle. The advantage of looking at the aggregate level of happiness is that it solves the problems of missing peer effects and measurement error that plague models of individual level happiness, though the disadvantage is a dramatic loss of degrees of freedom. We use panel data from the Household Income and Labour Dynamics for Australia (HILDA), which allows us to construct an index of the severity of life changes for each age. This single-variable Stress Index is able to explain over 80% of the variation in happiness over time. Unexpectedly, aggregate ‘positive stress’ (such as marriage rates by age or levels of job promotion) have greater negative effects on aggregate life satisfaction than negative stress (such as negative financial events or deaths of spouses), which we interpret as a strong indication that what is deemed a positive event by the person involved is a highly negative event for his or her peers. We find some evidence that extraverted individuals get affected less negatively by stress. The happiness maximising policy is then to reduce changes over the life cycle to the bare minimum needed to sustain a dynamic economy and to sustain procreation.
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#289Download full text
- JEL-Codes:
- C23;C25;I31.
- Keywords:
- Happiness methodology, life satisfaction, children, change, lifetime, school, friends, environment
Unhappy Young Australians: a domain approach to explain life satisfaction change in children
Australian happiness levels are known to decline between the age of 15 and 23 by almost 0.7 on a ten-point scale. To find out what happens before that age, we develop child-specific scales to measure the effect of personality and life satisfaction domains on childhood happiness. With an internet-based survey, we collect unique data from 9 to 14 year old Australian children. We find an even steeper happiness decline before the age of 14. Surprisingly, the "environment" domain has no significant effect on childhood happiness, whilst the children's "school" and "interaction with friends" domains explain over 40% of the decline in childhood happiness. The decline in childhood happiness is steepest when the children transition from lower grade school to high school. As expected, extraverted children are happier, but unexpectedly, so are conscientious children. The paper ends with a discussion of the possibilities for promoting happiness maximising programmes in schools.
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#288Download full text
- JEL-Codes:
- Z120; I200; J240
- Keywords:
- SUICIDE, RELIGION, PROTESTANTISM, CATHOLICISM
Suicide and Religion: New Evidence on the Differences Between Protestantism and Catholicism
In this study of the persistent social phenomenon of suicide, we find that even though theological and social differences between Catholicism and Protestantism have decreased, Catholics are still less likely than Protestants to commit or accept suicide. This difference remains even after we control for such confounding factors as social and religious networks. Although religious networks do mitigate suicides among Protestants, the influence of church attendance is more dominant among Catholics. The methodological strength of our paper is that it uses two data sets: a 20-year panel for Switzerland and a cross-sectional analysis of alternative religious concepts like religious commitment and religiosity in 414 European regions. We find that these alternative concepts strongly reduce acceptance of suicide.
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#287Download full text
- JEL-Codes:
- D03;D72;D83;H70
- Keywords:
- Bounded rationality, voting, referenda attention, rules of thumb
Bounded Rationality and Voting Decisions Exploring a 160-year Period
Using a natural voting experiment in Switzerland that encompasses a 160-year period (1848–2009), we investigate whether a higher level of complexity leads to increased reliance on expert knowledge. We find that when more referenda are held on the same day, constituents are more likely to refer to parliamentary recommendations in making their decisions. This finding holds true even when we narrow our focus to referenda with a relatively lower voter turnout on days on which more than one referendum was held. We also show that when constituents face a higher level of complexity, they listen to parliament rather than interest groups.
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#286Download full text
- JEL-Codes:
- E22;F2;F36
- Keywords:
- Financial Globalisation, intra-sector/inter-sector reallocation of capital, efficient capital allocation, development, Tobin Q
Financial Globalisation and Sectoral Reallocation of Capital in South Africa
The study examines the impact of financial globalisation on intra-sector and inter-sector firm level reallocation of capital in South Africa using panel data for the period 1991-2008. The measure of efficient reallocation of capital is based on the variation of firm's marginal returns to capital around the optimal level, while the measure of financial globalisation is constructed by tracing the financial reforms/restrictions that took place in South Africa since the 1970s. We find that financial globalisation is associated with a reduction of the dispersion of firms' marginal returns around their sectoral steady states suggesting that financial globalisation enhances efficient reallocation of capital. The benefits of financial globalisation seem to be stronger at the intersector rather than intra-sector level, implying that the implicit/explicit barriers to free movement of capital across firms in different sectors may limit the benefits of financial globalisation. Further results show that quality institutions are a pre-requisite if the efficiency gains from financial globalisation are to be realised. Finally, there is evidence to suggest that the benefits of financial globalisation may also manifest indirectly through its role in augmenting the domestic financial system.
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#285Download full text
- JEL-Codes:
- H26; H71
- Keywords:
- tax compliance, moral suasion, field experiment
A Field Experiment on Moral Suasion and Tax Compliance Focusing on Under-Declaration and Over-Deduction
Field experiments in the area of tax compliance are rare. This field experiment generates a unique data set with respect to individuals' under-declaration of income and wealth and over-deductions of tax credits by obtaining exclusive full access to the audits. Using this commune level data from Switzerland, the paper explores the influence of moral suasion on tax compliance. Moral suasion was introduced through a treatment in which taxpayers received a letter signed by the commune's fiscal commissioner containing normative appeals. Interestingly, I observe differences between under-declaration and over-deductions. Moreover, the overall finding is in line with former results that moral suasion has hardly any effect on taxpayers' compliance.
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#284Download full text
- JEL-Codes:
- A11;B40;C0;N01;Z0
- Keywords:
- Citations, Theory, Empirics, Cross-Country, North America
Citation Success Over Time: Theory or Empirics?
This study investigates the citation patterns of theoretical and empirical papers over a period of almost 30 years, while also exploring the determinants of citation success. The results indicate that empirical papers attract more citation success than theoretical studies. However, the pattern over time is very similar with yearly mean citations peaking after around 4 years. Moreover, among empirical papers it appears that the cross-country studies are more successful than single country studies focusing on North America data or other regions.
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#283Download full text
- JEL-Codes:
- C14; D24; L60; O14; O33
- Keywords:
- Bootstrap truncated regression; technical efficiency; data envelopment analysis; total-factor productivity; efficiency change; technical change; Malmquist productivity index; Singapore manufacturing
Efficiency and Productivity of Singapore's Manufacturing Sector 2001-2010: An analysis using Simar and Wilson's (2007) bootstrapped truncated approach
This paper seeks to explain the lagging productivity in Singapore's manufacturing noted in the statements of the Economic Strategies Committee Report 2010. Two methods are employed: the Malmquist productivity to measure total factor productivity change and Simar and Wilson's (J Econ, 136:31–64, 2007) bootstrapped truncated regression approach. In the first stage, the nonparametric data envelopment analysis is used to measure technical efficiency. To quantify the economic drivers underlying inefficiencies, the second stage employs a bootstrapped truncated regression whereby bias-corrected efficiency estimates are regressed against explanatory variables. The findings reveal that growth in total factor productivity was attributed to efficiency change with no technical progress. Most industries were technically inefficient throughout the period except for 'Pharmaceutical Products'. Sources of efficiency were attributed to quality of worker and flexible work arrangements while incessant use of foreign workers lowered efficiency.
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#282Download full text
- JEL-Codes:
- D19; C61; M59
- Keywords:
- Data envelopment analysis, technical efficiency, basketball players
A Note on the "Linsanity" of Measuring the Relative Efficiency of National Basketball Association (NBA) Guards
This note examines the productive efficiency of 62 starting guards during the 2011/12 National Basketball Association (NBA) season. This period coincides with the phenomenal and largely unanticipated performance of New York Knicks’ starting point guard Jeremy Lin and the attendant public and media hype known as Linsanity. We employ a data envelopment analysis (DEA) approach that includes allowance for an undesirable output, here turnovers per game, with the desirable outputs of points, rebounds, assists, steals, and blocks per game and an input of minutes per game. The results indicate that depending upon the specification, between 29 and 42 percent of NBA guards are fully efficient, including Jeremy Lin, with a mean inefficiency of 3.7 and 19.2 percent. However, while Jeremy Lin is technically efficient, he seldom serves as a benchmark for inefficient players, at least when compared with established players such as Chris Paul and Dwayne Wade. This suggests the uniqueness of Jeremy Lin's productive solution and may explain why his unique style of play, encompassing individual brilliance, unselfish play, and team leadership, is of such broad public appeal.
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#281Download full text
- JEL-Codes:
- N31;N32; Z12; Z13
- Keywords:
- Inherited trust, generalized trust, US immigrants
Inherited Trust and Growth - Comment
Algan and Cahuc in "Inherited Trust and Growth" (AER, 2010) argue that "inherited trust" is a key factor in explaining growth rates across countries. They derive a measure of inherited trust by linking respondents' "home countries" in the United States General Social Survey (1972-2004) and the 2000 wave of the World Values Survey. Algan and Cahuc then estimate trust levels for people born before 1910 (inherited trust in 1935) and afterwards (inherited trust in 2000). They show a strong link between economic growth rates and inherited trust. We do not challenge this result, but we do argue that: (1) the 2000 World Values Survey has many anomalous results; (2) the estimates for inherited trust in 1935 are mostly based upon tiny samples for most ethnic heritage groups in the General Social Survey; and (3) Algan and Cahuc’s findings are based upon two-tailed rather than one-tailed tests. We reestimate their model using the more reliable waves of the World Values Survey and find much weaker relationships between inherited trust in 1935 and trust in the home country. We also suggest caution in the overall measure of inherited trust in 1935.
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#280Download full text
- Keywords:
- Overlapping generations model, costly technology adoption, uncertainty, economic growth, inequality
Economic growth and inequality patterns in the presence of costly technology adoption and uncertainty
We develop a stochastic endogenous growth model to explain the diversity in growth and inequality patterns and the non-convergence of incomes in transitional economies where an underdeveloped financial sector imposes an implicit, fixed cost on the diversification of idiosyncratic risk. In the model endogenous growth occurs through physical and human capital deepening, with the latter being the more dominant element. We interpret the fixed cost as 'learning by doing' cost for entrepreneurs who undertake risk in the absence of well developed financial markets and institutions that help diversify such risk. As such, this cost may be interpreted as the implicit returns foregone due to the lack of diversification opportunities that would otherwise have been available, had such institutions been present. The analytical and numerical results of the model suggest three growth outcomes depending on the productivity differences between the projects and the fixed cost associated with the more productive project. We label these outcomes as poverty trap, dual economy and balanced growth. Further analysis of these three outcomes highlights the existence of a diversity within diversity. Specifically, within the 'poverty trap' and 'dual economy' scenarios growth and inequality patterns differ, depending on the initial conditions. This additional diversity allows the model to capture a richer range of outcomes that are consistent with the empirical experience of several transitional economies.
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#279Download full text
- Keywords:
- Agriculture, groundwater recharge, salinization, Sri Lanka
Groundwater overuse and farm-level technical inefficiency: evidence from Sri Lanka
Extraction of groundwater for onion and other cash crop production has been increasing rapidly during the last two decades in the dry zone areas of Sri Lanka. As a result of overuse, the quantity of available groundwater is gradually declining, while water quality is deteriorating. The deteriorating water quality has a negative impact on agricultural production, especially for crops (such as onions) that are sensitive to increases in salinity levels. This issue is examined with respect to onion production in Sri Lanka. A stochastic frontier production function (SFPF) is used, in which technical efficiency and the determinants of inefficiencies are estimated simultaneously. The results show that farmers are overusing groundwater in their onion cultivation which has resulted in decreasing yields. Factors contributing to inefficiency in production are also identified. The results have important policy implications.
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#278Download full text
- Keywords:
- Pesticides, agriculture, cost of illness, Sri Lanka
Determinants of health costs due to farmers’ exposure to pesticides: an empirical analysis
Pesticide spraying by farmers has an adverse impact on their health. However, in studies to date examining farmers' exposure to pesticides, the costs of ill-health and their determinants have been based on information provided by farmers themselves. Some doubt has therefore been cast on the reliability of these estimates. In this study, we address this by conducting surveys among two groups of farmers who use pesticides on a regular basis. The first group is made up of farmers who perceive that their ill-health is due to exposure to pesticides and have obtained at least some form of treatment (described in this paper as the 'general farmer group'). The second group is composed of farmers whose ill-health has been diagnosed by doctors and who have been treated in hospital for exposure to pesticides (described here as the 'hospitalised farmer group'). Cost comparisons are made between the two groups of farmers. Regression analysis of the determinants of health costs show that the most important determinants of medical costs for both samples are the defensive expenditure, the quantity of pesticides used per acre per month, frequency of pesticide use and number of pesticides used per hour per day. The results have important policy implications.
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#277Download full text
- JEL-Codes:
- E320;C450;O470
- Keywords:
- Business cycle synchronization, European Union countries, EU candidates, complex systems, network topology.
Synchronization and Diversity in Business Cycles: A Network Approach Applied to the European Union
This paper analyses synchronization in business cycles across the European Union (EU) since 1989. We include both old and new European Union members and countries which are currently negotiating accession, as well as potential European Union members. Our methodological approach is based on the correlation matrix and the networks within, which allows us to summarize the individual interaction and co-movement, while also capturing the existing heterogeneity of connectivity within the European economic system. The results indicate that the synchronization of the old EU countries remained stable until the current financial crisis. Additionally, the synchronization of the new and potential members has approached to the old EU members although we observe the existence of different synchronization levels and dynamics in output growth in single countries as well as in groups of countries. Some countries have achieved an important degree of co-movement (such as the Baltic Republics, Hungary, Slovenia and Iceland), while others have experienced reduced synchronization, or even desynchronization (such as Romania, Bulgaria and even Greece and Ireland).