Kjetil Storesletten, Fabrizio Zilibotti, Education, Educational Policy and Growth, Swedish Economic Policy Review, Vol. 7, 2000. (Journal Article)
This paper reviews the recent theoretical and empirical literature that relates education to growth, and draws some lessons for the Swedish experience. First, the “human capital accumulation” approach is discussed: agents decide, at each moment of their lives, to forego time or resources to improve their future productivity. The quality of the educational system is argued to be a crucial determinant of the decision to invest in human capital and of the growth rate of the economy. Hence, qualified teachers and appropriate incentive schemes within the schooling sectors are important for the long-run performance of the economy. Next, the trade-off between basic innovation (promoted by a restricted subset of economic activities) and learning-by-doing (which occurs at a more diffuse level in the economy) is analysed. It is argued that the former can be fostered by investments in “elite” research institutions, while the latter depends on the average educational attainment of the working population. Finally, the relationship between education, growth and inequality is discussed. The second part of the paper analyses recent trends in educational attainments in Sweden. Data show that enrolment rates in tertiary education in Sweden have lagged behind the major industrialised countries during the 1980s. Quantitatively, however, this is unlikely to be a major explanation of the productivity slowdown experienced by Sweden after 1970. But it is emphasised that (i) low educational premiums may harm incentives for people to invest in human capital; and (ii) low relative wages and low-power incentive schemes for teachers may cause a deterioration in the quality of education with negative effects on long-run growth. |
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Josef Zweimüller, Inequality, Redistribution, and Economic Growth, In: Working paper series / Institute for Empirical Research in Economics, No. No. 31, 2000. (Working Paper)
This paper provides a critical review of the recent literature on inequality and growth. After discussing historical and more recent distributional trends as well as empirical evidence on the relationship between inequality and growth, I focus on recent explanations of the inequality-growth puzzle. I consider both the impact of the functional and the personal distribution on long-run growth rates. A final section discusses a rather neglected issue in the recent literature: the impact of expected demand for innovation decisions. |
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Peter Zweifel, Switzerland, Journal of Health Politics, Policy and Law, Vol. 25 (5), 2000. (Journal Article)
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Peter Zweifel, Criteria for the future division of labor between private and social health insurance, Journal of Health Care Finance, Vol. 26 (3), 2000. (Journal Article)
This article's point of departure is that the individual has to manage three stochastic assets, namely health, wealth, and wisdom (skills), which tend to be positively correlated. It shows that the unexpected components of insurance payments should be negatively correlated for minimizing total asset volatility. The empirical finding is that in the United States, Japan, and Germany, the lines of social insurance contribute less to diversification than do those of private insurance. The article concludes with suggestions for new, umbrella-type insurance contracts that in the future should help individuals in the efficient management of their assets. |
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Rainer Winkelmann, Seemingly unrelated negative binomial regression, Oxford Bulletin of Economics and Statistics, Vol. 64 (4), 2000. (Journal Article)
This paper discusses the specification and estimation of seemingly unrelated multivariate count data models. A new model with negative binomial marginals is proposed. In contrast to a previous model based on the multivariate Poisson distribution, the new model allows for over-dispersion, a phenomenon that is frequently encountered in economic count data. Semi-parametric estimation is possible if some of the assumption of the fully specified model are violated. |
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Jacob Goeree, Charles A. Holt, Noisy Introspection in a One-Shot Traveler's Dilemma Game, In: Jovenes Economistas en Andalucia, Malaga, Spain, p. 186 - 196, 2000. (Book Chapter)
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C. Monica Capra, Jacob Goeree, Rosario Gomez, Charles A. Holt, Predation, asymmetric information and strategic behavior in the classroom: an experimental approach to the teaching of industrial organization, International Journal of Industrial Organization, Vol. 18 (1), 2000. (Journal Article)
Corruption in the public sector erodes tax compliance and leads to higher tax evasion. Moreover, corrupt public officials abuse their public power to extort bribes from the private agents. In both types of interaction with the public sector, the private agents are bound to face uncertainty with respect to their disposable incomes. To analyse effects of this uncertainty, a stochastic dynamic growth model with the public sector is examined. It is shown that deterministic excessive red tape and corruption deteriorate the growth potential through income redistribution and public sector inefficiencies. Most importantly, it is demonstrated that the increase in corruption via higher uncertainty exerts adverse effects on capital accumulation, thus leading to lower growth rates. |
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Jacob Goeree, Charles A. Holt, Asymmetric inequality aversion and noisy behavior in alternating-offer bargaining games, European Economic Review, Vol. 44 (4-6), 2000. (Journal Article)
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Jacob Goeree, Cars H. Hommes, Heterogeneous beliefs and the non-linear cobweb model, Journal of Economic Dynamics and Control, Vol. 24 (5-7), 2000. (Journal Article)
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Christian Ewerhart, Patrick W Schmitz, “Yes men”, integrity, and the optimal design of incentive contracts, Journal of Economic Behavior & Organization, Vol. 43 (1), 2000. (Journal Article)
In a pioneering approach towards the explanation of the phenomenon of “yes man” behavior in organizations, Prendergast [American Economic Review 83 (1993) 757–770] argued that incentive contracts in employment relationships generally make a worker distort his privately acquired information. This would imply that there is a trade-off between inducing a worker to exert costly effort and inducing him to tell the truth. In contrast, we show that with optimally designed contracts, which we term integrity contracts, the worker will both exert effort and report his information truthfully, and hence the first best can be achieved. |
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Christian Ewerhart, Chess-like games are dominance solvable in at most two steps, Games and Economic Behavior, Vol. 33 (1), 2000. (Journal Article)
We show that strictly competitive, finite games of perfect information that may end in one of three possible ways can be solved by applying only two rounds of elimination of dominated strategies. |
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Dario Bonato, Armin Schmutzler, When do firms benefit from environmental regulations? A simple microeconomic approach to the Porter controversy, Schweizerische Zeitschrift für Volkswirtschaft und Statistik = Swiss journal of economics and statistics, Vol. 136 (4), 2000. (Journal Article)
Michael Porter and others have recently argued that suitable environmental regulations are likely to induce cost-reducing innovations. We analyze under which conditions such arguments might be consistent with microeconomic analysis, and under which additional conditions the firms' benefits might exceed the costs. It turns out that this requires fairly specific conditions. |
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Josef Falkinger, Josef Zweimüller, Learning for employment, innovating for growth, Journal of Institutional and Theoretical Economics JITE, Vol. 156, 2000. (Journal Article)
We present a model in which workers must be educated to get a good job and firms must innovate in order to increase productivity. Education as well as innovation and production require skilled labor as inputs. This, together with the fact that learning opportunities differ across workers, determine simultaneously the long-run level of skilled employment and the long-run rate of growth. We study the impact of changes in the factors which affect the education of workers and the incentives to innovate, and discuss the growth and employment effects of labor market policy measures. |
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Josef Falkinger, Ernst Fehr, Simon Gächter, Rudolf Winter-Ebmer, A simple mechanism for the efficient provision of public goods: experimental evidence, American Economic Review, Vol. 90 (1), 2000. (Journal Article)
The author reports on a series of experiments designed to investigate the factor of incentive mechanisms in the case of private provisions of public goods. In the Control treatment, there was no mechanism so that subjects faced strong free-riding incentives. In the so-called Falkinger mechanism treatment, the author implemented the Falkinger mechanism. The studies explored the impact of the mechanism in different economic environments. Results showed that the proposed incentive mechanism is very promising. Section I of the paper introduces the mechanism to be examined. Section II discusses the experimental design. Empirical results are provided in Section III, and Section IV interprets these results followed by a summary. |
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Klaus Reiner Schenk-Hoppé, Is there a Golden Rule for the Stochastic Solow Growth Model?, In: Working paper series / Institute for Empirical Research in Economics, No. No. 33, 2000. (Working Paper)
This paper analyzes the dependence of average consumption on the saving rate in a one-sector neoclassical Solow growth model with production shocks and stochastic rates of population growth and depreciation where arbitrary ergodic processes are considered. The long-run behavior of the stochastic capital intensity and hence average consumption is uniquely determined by a random fixed point which depends continuously on the saving rate. We prove existence of a golden rule saving rate maximizing average consumption per capita. A dynamic inefficiency result is given to ascertain the importance of the golden rule for the stochastic Solow model. The cases of Cobb-Douglas and CES production function are analyzed numerically, revealing that shocks to either parameter can lead to higher average consumption at the golden rule saving rate. |
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Bruno Frey, Marcel Kucher, Managerial Power and Compensation, In: Working paper series / Institute for Empirical Research in Economics, No. No. 28, 1999. (Working Paper)
According to the widely used Managerial Power Model, a higher hierarchical position with associated higher power leads to higher compensation. In contrast, the Compensating Wage Differentials Model argues that there is a non-positive relationship between positional power and total compensation. Both power and income yield utility and in equilibrium managers are prepared to trade-off the two elements. The two opposing propositions are tested using a large survey data set from Switzerland. The results suggest that power positions do not yield higher compensation. Rather, there is a non-positive relationship between power position and compensation, if one takes into account all relevant factors influencing total compensation. |
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Reto Schleiniger, Ecological Tax Reform with Exemptions for the Export Sector in a two Sector two Factor Model, In: Working paper series / Institute for Empirical Research in Economics, No. No. 29, 1999. (Working Paper)
This present paper analyzes an energy tax reform that exempts the energy-intensive export sector from paying the energy tax and uses the additional revenue to cut existing taxes in all sectors. To that end, a two sector two factor model of an open economy that is small on the import side but not on the export side is applied. Within this model, an equivalence between a tax reform with and without exemption of the export sector is derived. The equivalence occurs because in both tax schemes the tax burden is shifted through an increasing producer price of labor from the domestic to the foreign household. |
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Jens-Ulrich Peter, Klaus Reiner Schenk-Hoppé, Business Cycle Phenomena in Overlapping Generations Economies with Stochastic Production, In: Working paper series / Institute for Empirical Research in Economics, No. No. 30, 1999. (Working Paper)
This paper analyzes economic fluctuations in an overlapping generations economy with productive capital in which random shocks in aggregate productivity are present. Under specific assumptions we obtain an explicit solution of the model. Applying random dynamical systems theory, we can prove that the long-run behavior of the economy is uniquely described by an asymptotically stable random fixed point. The statistical properties of the aggregates output, consumption, capital stock, and real wage are investigated numerically. We find that our artificial economy displays several real world business cycle phenomena.nn |
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Bruno Frey, Marcel Kucher, Alois Stutzer, Outcome, Process & Power in Direct Democracy, In: Working paper series / Institute for Empirical Research in Economics, No. No. 25, 1999. (Working Paper)
Based on survey data for Switzerland, new empirical findings on direct democracy are presented. In the first part, we show that, on average, public employees receive lower financial compensation under more direct democratic institutions. However, top bureaucrats are more constrained in direct democracies and have to be compensated by higher wages for that loss of power. In the second part, we demonstrate that reported subjective well-being of the population is much higher in jurisdictions with stronger direct democratic rights. This is not only the case because people value political outcomes higher but they derive utility from the political process itself. |
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Hans Gersbach, Armin Schmutzler, External spillovers, internal spillovers and the geography of production and innovation, Regional Science and Urban Economics, Vol. 29 (6), 1999. (Journal Article)
We consider a three-location duopoly model such that (i) firms choose production and innovation locations before (Bertrand) competition takes place and (ii) there are internal and external knowledge spillovers. We show: (1) agglomerations where firms earn negative profits may exist when there are both external and internal knowledge spillovers; (2) greater external spillovers do not necessarily favor agglomeration; (3) decreasing communication costs tend to favor agglomeration; (4) there are exactly two types of agglomeration equilibria: either both firms innovate in the agglomeration, or there is an innovator and an imitator; and (5) if there is a location where both firms produce, then innovation must take place in this location. |
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