Sebastian Kube, Michel Maréchal, Clemens Puppe, The Currency of Reciprocity - Gift-Exchange in the Workplace, In: Working paper series / Institute for Empirical Research in Economics, No. No. 377, 2011. (Working Paper)
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What determines reciprocity in employment relations? We conducted a controlled field experiment to measure the extent to which monetary and non-monetary gifts affect workers’ performance. We find that non-monetary gifts have a much stronger impact than monetary gifts of equivalent value. We also observe that when workers are offered the choice, they prefer receiving money but reciprocate as if they received a non-monetary gift. This result is consistent with the common saying, "it’s the thought that counts". We underline this point by showing that also monetary gifts can effectively trigger reciprocity if the employer invests more time and effort into the gift’s presentation. |
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Sandro Favre, The Impact of Immigration on the Wage Distribution in Switzerland, In: Working paper series / Department of Economics, No. No. 22, 2011. (Working Paper)
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Recent immigrants in Switzerland are overrepresented at the top of the wage distribution in high and at the bottom in low skill occupations. Basic economic theory thus suggests that immigration has led to a compression of the wage distribution in the former group and to an expansion in the latter. The data confirm this proposition for high skill occupations, but reveal effects close to zero for low skill occupations. While the estimated wage effects are of considerable magnitude at the tails of the wage distribution in high skill occupations, the effects on overall inequality are shown to be negligible. |
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Stefan Staubli, Josef Zweimüller, Does raising the retirement age increase employment of older workers?, In: Working paper series / Department of Economics, No. 20, 2012. (Working Paper)
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Two pension reforms in Austria increased the early retirement age from 60 to 62 for men and from 55 to 58.25 for women. The reforms reduced early retirement by 18.9 percentage points among affected men aged 60-62 and by 22.3 percentage points among affected women aged 55-58.25. The associated increase in employment was merely 6.8 percentage points among men and 10.1 percentage points among women. The reforms had large spillover effects to the unemployment insurance program but negligible effects on disability insurance claims. Specifically, unemployment increased by roughly 10 percentage points both among men and women. Spillover effects had substantial fiscal implications. Absent spillover effects, the reduction of net government expenditures would have amounted to 264 million Euros per year. Due to higher unemployment insurance claims and associated foregone income tax revenues the actual reduction was only 148 million Euros. High-wage and healthy workers carried the bulk of the fall in net government expenditures. Low-wage and less healthy workers generated much less government savings as they either continue to retire early via disability pensions or bridge the gap to regular retirement by drawing unemployment benefits. |
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Jacob Goeree, Alexey Kushnir, On the Equivalence of Bayesian and Dominant Strategy Implementation in a General Class of Social Choice Problems, In: Working paper series / Department of Economics, No. No. 21, 2011. (Working Paper)
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We consider a standard social choice environment with linear utilities and independent, one-dimensional, private values. We provide a short and constructive proof that for any Bayesian incentive compatible mechanism there exists an equivalent dominant strategy incentive compatible mechanism that delivers the same interim expected utilities for all agents. We demonstrate the usefulness and applicability of our approach with several examples. Finally, we show that the equivalence between Bayesian and dominant strategy implementation breaks down when utilities are non-linear or when values are interdependent, multi-dimensional, or correlated. |
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Rafael Lalive, Michael Morlok, Josef Zweimüller, Applying for jobs: Does ALMP participation help?, In: Working paper series / Department of Economics, No. No. 19, 2011. (Working Paper)
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This paper calculates the impact of Active Labour Market Programmes through the use of three new indicators measuring the application performance of the unemployed. These indicators can be measured repeatedly and therefore allow the usage of Panel Regression methods, cancelling out any unobserved individual heterogeneity. To implement the new approach, data on 30,000 applications has been collected. Using this data, a large positive effect for unemployed with a long term unemployment forecast was estimated. For unemployed without such a forecast, the effect is much smaller. The paper also shows that the new evaluation approach fulfils the requirements of a good controlling instrument: It is accurate, detailed, non-intrusive, inexpensive and therefore easy to keep up to date, easy to understand and communicate. |
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Andreas Hefti, On Uniqueness and Stability of symmetric equilibria in differentiable symmetric games, In: Working paper series / Department of Economics, No. No. 18, 2011. (Working Paper)
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Higher-dimensional symmetric games become of more and more importance for applied micro- and macroeconomic research. Standard approaches to uniqueness of equilibria have the drawback that they are restrictive or not easy to evaluate analytically. In this paper I provide some general but comparably simple tools to verify whether a symmetric game has a unique symmetric equilibrium or not. I distinguish between the possibility of multiple symmetric equilibria and asymmetric equilibria which may be economically interesting and is useful to gain further insights into the causes of asymmetric equilibria in symmetric games with higher-dimensional strategy spaces. Moreover, symmetric games may be used to derive some properties of the equilibrium set of certain asymmetric versions of the symmetric game. I further use my approach to discuss the relationship between stability and (in)existence of multiple symmetric equilibria. While there is an equivalence between stability, inexistence of multiple symmetric equilibria and the unimportance of strategic effects for the comparative statics, this relationship breaks down in higher dimensions. Stability under symmetric adjustments is a minimum requirement of a symmetric equilibrium for reasonable comparative statics of symmetric changes. Finally, I present an alternative condition for a symmetric equilibrium to be a local contraction which is more general than the conventional approach of diagonal dominance and yet simpler to evaluate than the eigenvalue condition of continuous adjustment processes. |
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Christian Ewerhart, Optimal Design and p-Concavity, In: Working paper series / Institute for Empirical Research in Economics, No. No. 409, 2011. (Working Paper)
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Some of the most beautiful results in mechanism design depend crucially on Myerson's (1981) regularity condition. E.g., the second-price auction with reserve price is revenue maximizing only if the type distribution is regular. This paper offers two main results. First, an interpretation of regularity is developed in terms of being the next to fail. Second, using expanded concepts of concavity, a tight sufficient condition on the density function is formulated. New examples of parameterized distributions are shown to be regular. Applications include standard design problems, optimal reserve prices, the analysis of bidding data, and multidimensional types. |
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Christian Ewerhart, Cournot games with biconcave demand, In: Working paper series / Department of Economics, No. 16, 2014. (Working Paper)
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Biconcavity is a simple condition on inverse demand that corresponds to the ordinary concept of concavity after simultaneous parameterized transformations of price and quantity. The notion is employed here in the framework of the homogeneous-good Cournot model with potentially heterogeneous firms. The analysis leads to unified conditions, respectively, for the existence of a pure-strategy equilibrium via nonincreasing best-response selections, for existence via quasiconcavity, and for uniqueness of the equilibrium. The usefulness of the generalizations is illustrated in cases where inverse demand is either "nearly linear" or isoelastic. It is also shown that commonly made assumptions regarding large outputs are often redundant. |
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Bruno Frey, Tullock challenges: happiness, revolutions and democracy, In: Working paper series / Department of Economics, No. No. 15, 2011. (Working Paper)
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Gordon Tullock has been one of the most important founders and contributors to Public Choice. Two innovations are typical “Tullock Challenges”. The first relates to method: the measurement of subjective well-being, or happiness. The second relates to digital social networks such as Facebook, Twitter, or to some extent Google. Both innovations lead to strong incentives by the governments to manipulate the policy consequences. In general “What is important, will be manipulated by the government”. To restrain government manipulation one has to turn to Constitutional Economics and increase the possibilities for direct popular participation and federalism, or introduce random mechanisms. |
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Lasse Steiner, Bruno Frey, Imbalance of World Heritage List: Did the UNESCO Strategy Work?, In: Working paper series / Department of Economics, No. No. 14, 2011. (Working Paper)
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The official intention of the UNESCO World Heritage List is to protect the global heritage. However, the imbalance of the distribution of Sites according to countries and continents is striking. Consequently, the World Heritage Committee launched the Global Strategy for a Balanced, Representative and Credible World Heritage List in 1994. To date, there have not been any empirical analyses conducted to study the impact of this strategy. This paper shows that the imbalance did not decrease and perhaps increased over time, thus reflecting the inability of the Global Strategy to achieve a more balanced distribution of Sites. |
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Andreas Kuhn, Inequality perceptions, distributional norms, and redistributive preferences in East and West Germany, In: Working paper series / Department of Economics, No. No. 09, 2011. (Working Paper)
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This paper studies differences in inequality perceptions, distributional norms, and redistributive preferences between East and West Germany. As expected, there are substantial differences with respect to all three of these measures. Surprisingly, however, differences in distributional norms are much smaller than differences with respect to inequality perceptions or redistributive preferences. Nonetheless, individuals from East Germany tend to be more supportive of state redistribution and progressive taxation, and less likely to have a conservative political orientation, even conditional on having the same inequality perceptions and distributional norms. |
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Robertas Zubrickas, Managerial Accountability for Payroll Expense and Firm-Size Wage Effects, In: Working paper series / Institute for Empirical Research in Economics, No. No. 474, 2011. (Working Paper)
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We argue that job performance appraisal is an agency problem with asymmetric transfer values: an employee is paid in proportion to the rating received from his line manager, who only partially internalizes the resultant payroll cost. This asymmetry in rating valuations is based on evidence that managers are not fully accountable for payroll expense, with the degree of unaccountability increasing in firm size. We develop a nested agency model of economic organization of a firm with unaccountable managers, which in equilibrium obtains the firm-size wage effects - the large-firm wage premium and inverse relationship between firm size and wage dispersion. |
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Andrew Clausen, Carlo Strub, Money Cycles, In: Working paper series / Department of Economics, No. No. 08, 2011. (Working Paper)
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Classical models of money are typically based on a competitive market without capital or credit. They then impose exogenous timing structures, market participation constraints, or cash-in-advance constraints to make money essential. We present a simple model without credit where money arises from a fixed cost of production. This leads to a rich equilibrium structure. Agents avoid the fixed cost by taking vacations and the trade between workers and vacationers is supported by money. We show that agents acquire and spend money in cycles of finite length. Throughout such a “money cycle,” agents decrease their consumption which we interpret as the hot potato effect of inflation. We give an example where money holdings do not decrease monotonically throughout the money cycle. Optimal monetary policy is given by the Friedman rule, which supports efficient equilibria. Thus, monetary policy provides an alternative to lotteries for smoothing out non-convexities. |
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Alain Cohn, Ernst Fehr, Benedikt Herrmann, Frédéric-Guillaume Schneider, Social Comparison in the Workplace: Evidence from a Field Experiment, In: Working paper series / Department of Economics, No. No. 07, 2011. (Working Paper)
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We conducted a randomized field experiment to examine how workers respond to wage cuts, and whether their response depends on the wages paid to coworkers. Workers were assigned to teams of two, performed identical individual tasks, and received the same performance?independent hourly wage. Cutting both team members’ wages caused a substantial decrease in performance. When only one team member’s wage was cut, the performance decrease for the workers who received the cut was more than twice as large as the individual performance decrease when both workers’ wages were cut. This finding indicates that social comparison processes among workers affect effort provision because the only difference between the two wage cut conditions is the other team member’s wage level. In contrast, workers whose wage was not cut but who witnessed their team member’s pay being cut displayed no change in performance relative to the baseline treatment in which both workers’ wages remained unchanged, indicating that social comparison exerts asymmetric effects on effort. |
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Gino Gancia, Andreas Müller, Fabrizio Zilibotti, Structural Development Accounting, In: Working paper series / Department of Economics, No. No. 10, 2011. (Working Paper)
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We construct and estimate a unified model combining three of the main sources of cross-country income disparities: differences in factor endowments, barriers to technology adoption and the inappropriateness of frontier technologies to local conditions. The key components are different types of workers, distortions to capital accumulation, directed technical change, costly adoption and spillovers from the world technology frontier. Despite its parsimonious parametrization, our empirical model provides a good fit of GDP data for up to 86 countries in 1970 and 122 countries in 2000. Removing barriers to technology adoption would increase the output per worker of the average non-OECD country relative to the US from 0.19 to 0.61, while increasing skill premia in all countries. Removing barriers to trade in goods amplifies income disparities, induces skill-biased technology adoption and increases skill premia in the majority of countries. These results are reverted if trade liberalization is coupled with international IPR protection. |
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Fabian Herweg, Konrad Mierendorff, Uncertain demand, consumer loss aversion, and flat-rate tariffs, In: Working paper series / Department of Economics, No. No. 12, 2011. (Working Paper)
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We consider a model of firm pricing and consumer choice, where consumers are loss averse and uncertain about their future demand. Possibly, consumers in our model prefer a flat rate to a measured tariff, even though this choice does not minimize their expected billing amount—a behavior in line with ample empirical evidence. We solve for the profit-maximizing two-part tariff, which is a flat rate if (a) marginal costs are not too high, (b) loss aversion is intense, and (c) there are strong variations in demand. Moreover, we analyze the optimal nonlinear tariff. This tariff has a large flat part when a flat rate is optimal among the class of two-part tariffs. |
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Dominic Rohner, Mathias Thoenig, Fabrizio Zilibotti, War Signals: A Theory of Trade, Trust and Conflict, In: Working paper series / Department of Economics, No. No. 13, 2011. (Working Paper)
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We construct a dynamic theory of civil conflict hinging on inter-ethnic trust and trade. The model economy is inhabitated by two ethnic groups. Inter-ethnic trade requires imperfectly observed bilateral investments and one group has to form beliefs on the average propensity to trade of the other group. Since conflict disrupts trade, the onset of a conflict signals that the aggressor has a low propensity to trade. Agents observe the history of conflicts and update their beliefs over time, transmitting them to the next generation. The theory bears a set of testable predictions. First, war is a stochastic process whose frequency depends on the state of endogenous beliefs. Second, the probability of future conflicts increases after each conflict episode. Third, "accidental" conflicts that do not reflect economic fundamentals can lead to a permanent breakdown of trust, plunging a society into a vicious cycle of recurrent conflicts (a war trap). The incidence of conflict can be reduced by policies abating cultural barriers, fostering inter-ethnic trade and human capital, and shifting beliefs. Coercive peace policies such as peacekeeping forces or externally imposed regime changes have instead no persistent effects. |
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Bruno Frey, Paolo Pamini, World Heritage: Where are we? An empirical analysis, In: Working paper series / Department of Economics, No. No. 11, 2011. (Working Paper)
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A statistical analysis of the UNESCO World Heritage List is presented. The World Heritage Convention intends to protect global heritage of outstanding value to mankind, but there has been great concern about the missing representativity of the member countries. There is a strongly biased distribution of Sites according to a country’s population, area or per capita income. The paper reveals the facts but refrains from judging whether the existing distribution is appropriate or not. This task must be left to the discussion in the World Heritage Convention. |
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Luke Lindsay, Market Experience and Willingness to Trade: Evidence from Repeated Markets with Symmetric and Asymmetric Information, In: Working paper series / Department of Economics, No. No. 05, 2011. (Working Paper)
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Many studies have found a gap between willingness-to-pay and willingness-to-accept that is inconsistent with standard theory. There is also evidence that the gap is eroded by experience gained in the laboratory and naturally occurring markets. This paper argues that the gap and the effects of experience are explained by a caution heuristic. This conjecture is tested in a repeated market experiment with symmetric and asymmetric information. The results support the conjecture: people do seem to use heuristics rather than reacting optimally and their behavior adjusts slowly when the environment changes. |
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Christian Hepenstrick, The sources and magnitudes of Switzerland’s gains from trade, In: Working paper series / Department of Economics, No. No. 06, 2011. (Working Paper)
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This paper adapts the modern workhorse model of quantitative trade theory (Eaton and Kortum, 2002) as a measurement tool to quantify the magnitudes of Switzerland’s gains from trade. I find that the importance of single trading partners for Switzerland’s welfare is surprisingly small. The reason are reallocation effects - if trade between Switzerland and some partner country is inhibited, other supplier countries step into the breach so that the losses are limited. However, if one considers groups of countries, for example the EU, the welfare effects become large. In terms of policy this implies that whereas bilateral trade agreements may be important for particular industries per se, their relevance lies primarily in ensuring that the Swiss trade costs remain constant relative to trade costs within large trading blocks. |
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