Abstract This study examines socially concerned delegation in a bilateral monopoly where upstream production exhibits diseconomies of scale, considering both manufacturer-leadership and simultaneous-move timing structures. While existing studies emphasize the coordination-improving effects of socially concerned delegation under standard cost conditions, sufficiently strong upstream diseconomies can overturn these results. In the manufacturer-leadership game, socially concerned delegation may fail to generate a Pareto improvement because the resulting output expansion amplifies convex production costs. In the simultaneous-move game, equilibrium negative social concern emerges, reflecting a strategic incentive to restrain output under increasing marginal costs.
Abstract The impact of social preferences along with institutional efficiency of the hospital are explored on the optimal contract between the hospital and the physician where the physician’s effort is non-contractible. We show that the hospital may benefit from employing a more ‘social-regarding’ physician and might also benefit if the physician is more inequity-averse. The physician on the other hand benefits if she is attached to a more socially conscious hospital. Optimal health care increases with physician’s social-regarding altruism and hospital’s social consciousness.
Innovation fosters economic growth and the long-run dynamics of national economies. However, recent literature shows that innovation is also a source of increasing income inequalities. Public policies face thus an important trade-off between efficiency and equity effects of innovation. What are the possible policy strategies to address this trade-off? The paper presents a model in which innovations can be developed by both private firms and public companies. Technological change increases the profit share in the long-run, exacerbating income inequalities between firms' owners, employed workers, and the unemployed. I empirically calibrate the model for the US economy and carry out a simulation analysis to investigate the effects of different policies aimed at reducing the inequality effects of innovation. Specifically, the analysis compares two distinct policy strategies: one is based on a standard economic policy approach that increases taxes to finance welfare spending; the other is based on a new approach - the Entrepreneurial State - in which the profits of innovations developed by public R&D companies are used to finance welfare programs. The results point out the advantages and drawbacks of different strategies and show that the optimal policy strategy largely depends on the policy maker's preferences regarding the income distribution.
This paper studies the desirability of tax reform toward uniform taxes on a subset of commodities under nonlinear income taxation, when commodity taxes are restricted to be linear. Suppose that preferences are partially separable between a subset of goods and labor supply. We first show that, in the presence of linear taxation on all goods, a Pareto-improving tax reform toward partially uniform commodity taxation fails to satisfy incentive compatibility. Furthermore, distortions in production that alter relative wages can improve welfare by relaxing incentive-compatibility constraints. We then show that there is no local Pareto-improving direction from uniform taxation within a separable group of goods if and only if the demand functions for these goods exhibit parallel income effects across income classes. This result highlights that, under the restricted policy instruments, constraints on commodity demands remain essential even under nonlinear income taxation.
Antitrust authorities increasingly rely on independent external economists and technical experts in merger, cartel, and conduct investigations. Yet because outcome-contingent compensation would compromise, or at least appear to compromise, the independence of expert advice, experts hired by the authority are rarely rewarded on the basis of enforcement outcomes. This creates incentive distortions. We ask whether disclosing expert performance to future employers alleviates this problem. In a Gaussian career-concerns model with endogenous information acquisition, disclosure improves labor-market inference about ability, strengthens effort incentives, reduces the marginal cost of evidence, and leads the authority to make better-informed decisions. Disclosure is optimal for the authority if and only if its fixed cost is below a positive threshold that increases with higher average ability, lower talent dispersion, greater task uncertainty, and noisier priors. We further show that a welfare-minded planner may be less inclined to disclose than the authority; that even noisy evaluations strengthen incentives; that transparency attracts stronger experts when entry is endogenous; and that in multi-expert teams individual attribution is essential - i.e., team-level disclosure only partially mitigates moral hazard.
Abstract This paper investigates whether mafia infiltration episodes may affect citizens’ participation in the electoral process of local administrations. Using a novel dataset that combines information on city council dissolutions and voter turnout in local elections of municipalities located in southern Italy for the period 1991–2020, we show that the negative informational shock provided by mafia infiltration episodes decreases the participation rate by margin of about 2 % points. We also find that this effect is persistent in time. We show that the effect is homogeneous across locations but not over time. Finally, we document a spillover effect in neighboring municipalities, showing that the participation rate in local elections decreases by a margin of 1 % point.
Abstract We construct the first internationally comparable measure of offline economic connectedness (EC), extending the online framework of Chetty et al. to a cross-country setting. We conceptualize EC as access to individuals in high-status occupations and measure it as the probability that individuals from below-median income backgrounds are connected to at least one such individual (based on ISEI-88 classifications). We estimate EC both non-parametrically and using logistic specifications with country fixed effects and individual-specific controls to test for systematic cross-country differences. Using harmonized data across 13 Western countries, we document substantial variation in economic connectedness, ranging from below 51 % in countries such as Austria and Japan to over 78 % in Iceland and Switzerland. Consistent with findings for the U.S., we show that EC is positively correlated with intergenerational income mobility, suggesting that differences in social networks are associated with cross-country variation in economic opportunity.
This paper examines the effect of compulsory education on women's fertility over the reproductive life cycle, exploiting the 1972 compulsory schooling reform in Britain. Using data from the General Household Survey and a regression discontinuity design, the study finds that exposure to the reform is associated with a reduction of about 0.09 children for women observed at ages 20-30, but an increase of about 0.31 children for women observed at ages 40 and above. The pattern is consistent with a life-cycle interpretation in which compulsory education is associated with lower cumulative fertility at earlier stages but higher fertility accumulation at later stages of the reproductive life cycle. Overall, the findings indicate that education-induced reductions in early-life fertility need not translate into lower cumulative fertility observed at older ages.
Several developing countries have pushed towards expanding health insurance coverage to universal levels in recent years. This led to a debate on whether such expansions can have unintended impacts on the labor market decisions, such as a movement of workers towards the informal sector of the labor market, or a decrease in labor supply. We provide evidence on this issue by examining the labor market impacts of a health insurance program for the poor implemented in Indonesia in 2005. Using a rich longitudinal survey, we employ propensity score matching with difference in differences, with matching on a set of variables that include the observable characteristics used by the government to allocate the benefit. We find a negative impact on labor force participation at both the extensive and intensive margins of labor supply, mainly driven by women. The estimation results are less supportive of an impact of this health expansion on informal labor status.
We develop a two-period model of a vertically related market with two firms and a recycler. The manufacturer can restrict recycler's capacity by lowering output, since the recycler uses its scrap to compete in the input market. We assume the recycler is more efficient, producing at lower unit cost. Market outcomes depend on the recycler's collection rate and relative efficiency. If the collection rate is high and efficiency advantage is moderate, an unconstrained equilibrium arises where the recycler operates at optimal capacity; otherwise, constrained equilibrium prevails. Welfare outcomes differ accordingly. With low efficiency, partial recycling, which allows the recycler to produce freely, maximizes welfare. With very high efficiency, however, complete recycling is optimal. Vertical integration between the final good producer and recycler is not chosen voluntarily. Extended producer responsibility-induced integration is optimal only under constrained equilibrium with low recycling rate, or under unconstrained equilibrium with moderate efficiency. The results are also robust to alternative modes of competition and contract structures.
This paper analyzes how campaign contribution laws influence state-level welfare policies in the US. Previous studies show that in the US, policy outcomes often disproportionately reflect the preferences of high-income individuals and organized interest groups over those of low-income groups. The primary channel of this influence over policy is private campaign contributions. However, restricting the amount of money in politics through stricter campaign finance laws reduces this donor influence on political candidates and increases legislative representation for low-income groups. Using a panel of US states from 1980 to 2018, the paper examines two key measures of a state's welfare policy generosity, the real minimum wage and the earned income tax credit (EITC). The empirical analysis reveals that more stringent campaign contribution laws are associated with significant increases in both the minimum wage and EITC rates. These effects remain robust to a battery of sensitivity tests and to alternative measures of state welfare policy generosity.
This paper examines how loosening employment protection legislation (EPL) affects workers with different characteristics. Exploiting a 2012 Italian law, the "Fornero Reform," and using a difference-in-differences strategy on administrative data, we causally estimate heterogeneous effects on termination rates by sex-age, job rank, income, industry, and tenure. We find a relative increase in terminations for high-tenure, white-collar, and manufacturing workers. Though not direct evidence, this suggests that the stricter EPL was providing more protection to these worker groups on average. Further, the high-tenure increase may indicate that poor performers were protected for many years pre-reform. Our findings add to the EPL heterogeneous effect literature and limited work on the interaction between EPL and tenure.
Urbanization often exacerbates regional inequality while promoting economic growth. How to effectively coordinate spatial expansion and inclusive growth has become a policy challenge for developing economies. To address institutional constraints inherent in traditional urbanization pathways, China launched a new-type urbanization reform in 2014, aiming to achieve inclusive development within the region through urban residency conversion and equalization of public services. Exploiting the staggered rollout of this reform as a quasi-natural experiment and combining it with township-level nighttime-light data, we estimate a staggered difference-in-differences model that isolates the policy's effect on intra-county inequality. The results show that the reform significantly narrows economic disparities within counties. Mechanism analyses indicate that the policy raises factor mobility and spatial connectivity by expanding off-farm employment, attracting non-agricultural firms, and upgrading transport and communication infrastructure, thereby compressing within-county inequality. Spatially, the reform widens the gap between pilot and non-pilot counties while fostering convergence inside treated counties, with the largest gains accruing to the most disadvantaged townships. Heterogeneity analyses show that the policy has a more significant effect in counties with lower initial inequality, lighter fiscal pressure, higher population density, and stronger public-service provision. These findings provide new evidence on how institutional urbanization reforms can advance inclusive regional development.
We study the relationship between relative deprivation and subjective well-being in a developing economy. Using nationally representative household surveys from Chile (2009-2017), we construct an age-occupation-based measure of relative wage deprivation. We find that earning less than comparable peers is significantly associated with lower self-rated health, even after controlling for absolute income, demographic characteristics, and a rich set of socioeconomic and contextual factors. We further document substantial heterogeneity and non-linearity: the effect is persistent across the life course for women, while for men it emerges only at older ages. These results underscore the role of within-group income comparisons in shaping subjective well-being in unequal labour markets.
Using 20 years of data from the Korean Labor and Income Panel Study (KLIPS), this paper examines the wage returns to general experience, firm tenure, and industry- and occupation-specific tenure in South Korea. Employing the Altonji and Shakotko instrumental variable approach and the Topel two-step estimation method, I address biases from unobserved heterogeneity. The results reveal that 10 years of tenure have no significant effect on log wages, while 20 years of tenure increase wages by 11 %-30 %. Sector-specific skills play a critical role in wage growth, while the occupation-specific returns are minimal.
This paper examines the effect of quality-improving specific investment rather than cost-reducing specific investment in a vertical relationship. We consider a multi-stage game among two upstream firms and two downstream firms in which firms first make decisions of vertical integration and then upstream firms/divisions choose their investment levels after their choices between general investment and specific investment, and then price decisions of the upstream firms and downstream firms follow sequentially. In the game, the unique equilibrium is for neither pair to integrate and then make specific investments. Making a specific investment is the dominant strategy of upstream firms/divisions under all integration regimes. When only one pair of an upstream firm and a downstream firm is integrated, foreclosure will emerge in equilibrium due to specific investments. Under this integration regime, upstream firms/divisions reduce R&D investments due to lower profits thereby reducing welfare as well, unless the counter-merge emerges. If a counter-merger follows a merger, the merger is likely to be pro-competitive because it restores the R&D incentives and social welfare, and lowers consumer prices, whereas a one-sided integration tends to be anti-competitive if no counter-merger ensues.
We study rare special cases of existing employers opting into Social Security. We use restricted teacher-level data from Texas to analyze how public school districts that opt into Social Security handle the increased tax burden. Using event study and synthetic control methods, we find suggestive evidence that districts gradually reduce salary growth over time and reach a long-run salary difference that matches or exceeds the Social Security tax. We do not find evidence of changes in teacher employment. These results reveal potential implications of the Social Security opt-in for currently uncovered public sector workers, as well as local and state governments.
This paper investigates the effects of EU Cohesion Policy on income growth and inequality across municipalities in Italian Objective 1 regions. Using a difference-in-differences approach and detailed panel data from 2000 to 2022, we assess how staggered disbursement of EU funds affects per-capita income growth and income distribution. Although we find a significant and persistent positive effect of EU funds on income growth starting from 5 years after the first payment, the inequality - measured by Gini and Atkinson indices - tends to increase. This suggests that EU cohesion funds, even if effective in promoting income growth, do not necessarily contribute to greater equity.
While superstitious beliefs are known to influence property values through fixed attributes such as floor levels and address numbers, their role in price formation has received little attention. We provide novel evidence that housing prices bunch not only at round numbers but also at culturally "lucky" endings, particularly those ending in the digit 8. A hedonic price model reveals a 2.4 % premium for these "lucky-priced" homes. Our findings show that superstition functions as a behavioral heuristic in high-stakes bargaining, creating a new class of non-round focal points that systematically shape market outcomes.
This paper examines the employment outcomes of a cohort of non-college educated individuals who exit employment from occupations most exposed to automation risk. The analysis employs a novel set of granular task measures estimated from the detailed job attributes in the Occupational Information Network (O*NET). The granularity enables a rich characterization of non-routine work and task mobility choices for those without a college degree. The data yield multiple types of interpersonal, decision-making, cognitive, and technical tasks. Employing the granular tasks to analyze the employment outcomes for non-college educated workers who transition out of routine work, this study finds (1) the granular measures detect abstract tasks performed intensively in a range of skill contexts, (2) when exiting routine intensive work, non-college propensity to enter abstract work is just under 65 %, and (3) approximately one-quarter of those entries are into tasks yielding average wage gains for those making that transition.
