Volume 23, Issue 4

We consider a game of petty corruption between entrepreneurs and multiple bureaucrats. The potential value of the entrepreneur’s project is stochastic and private, and it can be realized only if the project is approved by all the bureaucrats. The bureaucrats simultaneously make take-it-or-leave-it demands of bribes in exchange for approving the project. The entrepreneur can either pay the required bribes or seek costly legal recourse against non-approval. The paper shows that there are multiple equilibria in the one-shot game as well as in the dynamic version of the game in which a sequence of entrepreneurs applies to the set of bureaucrats to seek project approvals. We then characterize a compelling class of equilibria, namely the bribe-income-maximizing-equilibrium, and show that total bribe exchanged under such equilibria is non-monotonic in the cost of legal recourse. Hence, a small/incremental reduction to the cost of appeal is either ineffective or can backfire, i.e. increase the amount of corruption.

This paper examines the performance of two environmental regulation policies – emission taxes and absolute standards – in a vertical market where an upstream foreign monopolist sells a specific input to two downstream multiproduct firms that generate pollution in the domestic country. Specifically, we use a three-stage game to analyze and compare the two policies for regulating downstream pollution. In the first stage, the domestic government determines an optimal tariff and sets one of the two instruments (taxes or standards) by maximizing social welfare, in stage two, the upstream foreign monopoly sets its input price, and finally, the downstream domestic firms independently make their output and abatement decisions for profit maximization. We find that total emissions are lower under the absolute standard. Nevertheless, the tax dominates the standard in terms of domestic welfare, consumer surplus, and downstream multiproduct firms’ profits. Thus, the tax equilibrium leads to a win-win-win situation compared to the standard equilibrium. These results show the non-equivalence of emission taxes and absolute standards in regulating downstream pollution. The analyses suggest that a pollution tax is an economically and politically feasible policy.

In this paper, we study the impact of the Coronavirus Aid, Relief, and Economic Security (CARES) Act economic impact payments to individuals on the spread of COVID-19 and subsequent mortality. There is a large economic literature linking income shocks and mortality. Using an event study approach and controlling for time-varying stay-at-home directives, we find no statistically significant change in confirmed case rates and no meaningful change to death rates from COVID-19. Our research suggests that distributing the individual stimulus payments at the same time to everyone had no effect on the spread of COVID-19.

This research examines the gender salary gap in STEM and nonSTEM disciplines at a public research university. We estimate earnings regressions for female and White male faculty members as a whole as well as for those working in STEM departments. Controlling for productive characteristics and field salary differentials, we perform mean and quantile decomposition analyses to identify potential salary inequities. We observe no gender salary gap for analyses of mean or median monthly salary. However, our salary quantile analyses for STEM departments indicate there are positive effects for women in top quantiles and negative effects for women in low quantiles compared to White male peers, other things equal. This implies that highly paid female academics working in STEM departments were better rewarded than their White male peers, but female academics at the lower end of the salary distribution were not paid on par with their White male peers.

Mergers between previously contending firms are a permanent challenge for policymaking as they potentially harm competition. The core incentive to merge is the prospect of higher joint profits of the previously independent firms after the merger. We discuss and compare the core assumptions of Horn and Wolinsky (1988) and von Ungern-Sternberg (1996) that lead to contrary results regarding the attractiveness of horizontal mergers of downstream firms in a 1:2 setting leading to a monopolized 1:1 setting. While the latter finds a merger beneficial for the downstream firms, it harms their joint profit, according to Horn & Wolinsky. We theoretically apply both models to the two settings. We also present extensive sample calculations that quantitatively confirm the two papers’ core insights. Discussing and contextualizing the results, we provide a comprehensive overview of horizontal mergers in the downstream part of vertical structures with bargaining over linear input prices. Due to continuing relevance of horizontal mergers for competition policy and, in particular, in light of the consolidation phase in tech start-ups, the topic is of enduring relevance in policymaking.

This study examines decisiveness as a potential moderator of the attraction effect. In an online experiment, we find that even though decisiveness moderates the attraction effect, it also moderates the preference reversal in the absence of a decoy. This suggests that the moderating role of decisiveness in the attraction effect lies, at least partially, in moderating choice reversals unrelated to the decoy. In addition, our findings show that about one-third of the most decisive participants exhibit an attraction effect. These findings are inconsistent with a conceptualization of a moderate attraction effect, arguing that only indecisive agents exhibit the effect. We discuss the theoretical and practical implications of our findings.

This study examines the impacts of demand-side (the improved employment protection law) and supply-side (pension reform) government interventions on older male workers’ employment outcomes in Japan. To identify the effects of interventions implemented concurrently, we employ a difference-in-difference-in-differences (DDD) approach with variation in the bindingness of the revision of employment protection law as our specification strategy. Our results show that the revised employment protection law had a significant positive impact on employment. However, the results of the event study’s DDD model show that the treatment effects do not last over time.

Environmental regulation and pollution control may clash against the presence of unverifiable tasks, like source-specific emissions. To tackle this issue, we reshape a voluntary agreement instrument, already available in the existing literature, from a dynamic perspective by means of a relational contracting approach. We define a Relational Voluntary Environmental Agreement (RVEA) in an N firms symmetric context, and show that even if emissions are not contractible across firms, and therefore enforcement cannot be delegated to a third party, if firms are sufficiently patient, a self-enforcing RVEA induces the achievement of the environmental objective. Finally, our welfare analysis reveals a notable result: our RVEA can imply less free riding and be welfare-improving with respect to a Voluntary Environmental Agreement enforced by a third party (along the lines of McEvoy, D. M., and J. K. Stranlund. 2010. “Costly Enforcement of Voluntary Environmental Agreements.” Environmental and Resource Economics 47: 45–63).

In course of the current energy crisis, the consequences of increasing gas prices are heavily discussed. To date, however, there is no evidence of the impact of gas prices on the labor market. Using administrative employment data from 2012 to 2020, we find for manufacturing establishments a gas price elasticity of labor demand of −0.02, likely reflecting a scale effect. We also show that a rise in the gas price leads to an increase in establishment closure. A negative impact of the gas price on wages of 2 percent is consistent with rent-sharing.

The importance of investments in early childhood education (ECE) has been widely documented in the literature. Among the benefits, particularly for children from disadvantaged backgrounds, is its potential to mitigate educational inequality. However, some evidence also suggests that the positive effects of ECE on later outcomes tend to dissipate over time, leaving children who attended such programmes no better off academically than those who did not. This paper studies the relationship between students’ years spent in ECE, from 0 to before starting primary school, and the results of their educational assessment outcomes at age 15. Using PISA survey data for 14 European countries from 2015 to 2018, we conduct a cross-country comparison of student performance in reading, mathematics, and science, correlating the results to the duration of ECE attendance. Our findings show that duration in ECE is associated with better assessments at age 15, but that the benefit is nonlinear and peaks at 3–4 years of attendance. Gender and migration background are associated with student performance on the assessments; but we don’t find evidence of heterogeneity in the relationship between ECE duration and test outcomes based on gender and migration background. Instead, we document differential effects of ECE duration according to age of entry to ECE, mother’s education, and the type of educational system attended.

This paper provides the first causal evidence of the effect of a change in divorce laws on noncognitive skills in adulthood. We exploit state-cohort variation in the adoption of unilateral divorce laws in the U.S. to assess whether children exposed to this law have different noncognitive skills in adulthood compared to those never exposed or exposed as adults. Using data from the National Survey of Midlife Development in the U.S. (MIDUS) and employing the staggered difference-in-differences identification strategy developed by Callaway and Sant’Anna, we show that divorce reform had a detrimental long-term effect on the conscientiousness of those who were exposed as children whether their parents divorced or not. Changes in parental inputs can explain most of the effect, which is greatest for men whose parents divorced.

Comparing the behaviour of subjects randomly allocated to perform tasks and tests online or in the lab, I find that the setting influences males’ and females’ behaviour differently. Males are more selfish in the online setting than in the lab, while females are more risk-averse when they answer online compared to the lab. Interestingly, performance in math is influenced by the setting for females: online they perform better. The gender gap in numeracy closes online, while it is present in the lab, where males solve more math problems. This work provides preliminary evidence on how gender differences and gaps can be altered by the setting. As online settings have become more and more common practice in running experiments and have started to be used also in education, it is important to understand the consequences that this shift implies also relative to gender differences and gaps.

Pre-Exposure Prophylaxis (PrEP) is a drug that, as demonstrated in clinical trials, when taken makes the user virtually immune to HIV. This has led to numerous countries making the drug available, but little is known about the population level effects of PrEP. Using panel data from 40 European countries I study the effect of countries adopting WHO recommendations to make PrEP available to citizens. I demonstrate that PrEP availability leads to around 15–20 % fewer new HIV infections. My results indicate that PrEP can be an effective tool in reducing HIV incidence.

We use a nationally-representative dataset that includes a large sample of sexual-orientation minorities to investigate gender bias and sexual-orientation discrimination in career progression. Our results are consistent with persistent gender bias findings and non-heterosexual identity-based employment discrimination. Our findings are consistent with previous work noting that protective legislation for gay and lesbian sexual identities have increased the cost of discrimination and contribute to the improved socioeconomic status of a substantial number of people in these minority groups. However, these gains have not been shared with other minority groups in the LGB+ community, which still have some of the lowest probabilities of holding managerial jobs, and higher probabilities of appearing in lower socioeconomic classes.