Kantian EquilibriumRoemer, John E.
doi: 10.1111/j.1467-9442.2009.01592.xpmid: N/A
Consider a game whose strategies are “contributions”. A strategy profile is a Kantian equilibrium if no player would like all players to alter their contributions by the same multiplicative factor. Kantian equilibria are Pareto efficient. We characterize the allocation rules on several domains of environments that can be implemented as Kantian equilibria. The concept unifies the proportional solution on production economies and the linear cost‐share equilibrium on public‐good economies. We study Kantian equilibrium in the prisoner's dilemma, in a voting problem, and in a political economy where redistribution is the issue. The Kantian dictum engenders considerable but not unqualified cooperation.
Collective Trust Behavior *Holm, Håkan J.; Nystedt, Paul
doi: 10.1111/j.1467-9442.2009.01593.xpmid: N/A
This paper investigates trust behavior in situations where decision‐makers are large groups and the decision mechanism is collective. Theories from behavioral economics and psychology suggest that trust in such situations may differ from interindividual trust. The experimental results here reveal a large difference in trust but not in trustworthiness between the individual and collective setting. Furthermore, a field experiment captures the determinants of collective trust behavior among two Swedish cohorts. Beliefs about the other group and one's own group are strongly associated with collective trustworthiness and trust behavior.
School Choice and Segregation: Evidence from an Admission Reform *Söderström, Martin; Uusitalo, Roope
doi: 10.1111/j.1467-9442.2009.01594.xpmid: N/A
We evaluate the effects of school choice on segregation using data from an admission reform in the Stockholm upper secondary schools. Before 2000, the students were assigned to their nearest school, but from the fall of 2000, the students can apply to any school within Stockholm and admission decisions are solely based on grades. As expected, the new admission policy increased segregation by ability. However, segregation by family background, and especially segregation between immigrants and natives, also increased significantly. The increase in segregation by family background can be explained by ability sorting, but the increase in ethnic segregation can not.
Adverse Selection and Entrepreneurship in a Model of DevelopmentJaimovich, Esteban
doi: 10.1111/j.1467-9442.2009.01595.xpmid: N/A
This paper presents a theory in which talented entrepreneurs are identified as the key agents driving the process of development and modernisation. Entrepreneurial skills are private information, which prevents full risk sharing. Development into a modern industrial economy might fail to take place, since potentially talented entrepreneurs may refrain from taking on the entrepreneurial risks as a way to avoid income shocks. An interesting feature of the model is the fact that the informational asymmetries are endogenous to the process of development, as they are related to the heterogeneity in entrepreneurial skills required in the manufacturing activities.
Dynamics of Export Market Entry and Exit *Ilmakunnas, Pekka; Nurmi, Satu
doi: 10.1111/j.1467-9442.2009.01596.xpmid: N/A
We apply discrete time duration models to explain the duration until new plants start to export and the duration until exit from the export markets, using data on Finnish manufacturing plants. Plants that are large, young, highly productive, and with high‐capital intensity are likely to enter the export market earlier and to survive in the export market longer. Foreign ownership increases chances of export entry, especially for small and low human capital plants, and decreases the risk of export failure for large, high‐productivity plants. The upper and lower tails of the productivity distribution are represented by plants that start exporting and those that are exiting, respectively.
Has Job Stability Decreased? Population Data from a Small Open Economy *Bratberg, Espen; Salvanes, Kjell G.; Vaage, Kjell
doi: 10.1111/j.1467-9442.2009.01598.xpmid: N/A
We use a population‐based employer–employee dataset to analyze changes in job stability in Norway. We first present descriptive analyses of tenure and separation rates, followed by regression‐adjusted measures controlling for changes in demographics and the business cycle. We see only weak evidence of changes in the tenure rates. In particular, for the public sector we find a slight increase in short tenures and a decrease in tenures above eight years. However, we do not find that this tendency towards less stable jobs leads to an increase in the flow to unemployment or out of the labor force.
The Layoff Rat Race *Bernhardt, Dan; Mongrain, Steeve
doi: 10.1111/j.1467-9442.2009.01579.xpmid: N/A
We investigate how discretionary investments in general and specific human capital are affected by the possibility of layoffs. After investments are made, firms may have to lay off workers, and will do so in inverse order of the profit that each worker generates. Greater skill investments, especially in specific human capital, contribute more to a firm's bottom line, so that workers who make those investments will be laid off last. We show that as long as workers' bargaining positions are not too weak, workers invest in specific human capital in order to reduce layoff probabilities. Indeed, workers over‐invest in skill acquisition from a social perspective whenever their bargaining power is strong enough, even though they only receive a share of any investment. More generally, we characterize how equilibrium skill investments are affected by the distribution of worker abilities within firms, the probability that a firm will downsize, and the distribution of employment opportunities in the economy.
Wage Formation and Bargaining Power during the Great Depression *Bårdsen, Gunnar; Doornik, Jurgen A.; Klovland, Jan Tore
doi: 10.1111/j.1467-9442.2009.01599.xpmid: N/A
We present an econometric analysis of wage behaviour in Norway during the interwar years. The analysis is based on a panel of manufacturing industry data using GMM estimation methods. Our empirical analysis shows that wage formation in the interwar period can be understood with the help of modern bargaining theory and well‐established wage equations. We estimate a long‐run wage curve that has all the standard features of being homogeneous in prices, proportional to productivity, and with a negative unemployment elasticity. We also present some new Monte Carlo evidence on the properties of the estimators used.